Segment 2 Of 2 Previous Hearing Segment(1)
SPEAKERS CONTENTS INSERTS
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Wednesday, April 1, 1998.
INSTITUTE OF MUSEUM AND LIBRARY SERVICES
WITNESSES
DIANE FRANKEL, DIRECTOR
LINDA BELL, DEPUTY DIRECTOR, BUDGET AND PLANNING
Mr. PORTER. We will continue our hearings this afternoon with the Institute of Museum and Library Services, and we are pleased to welcome the Director, Diane Frankel.
Ms. Frankel.
Ms. FRANKEL. Good afternoon, Chairman Porter.
Mr. PORTER. Good afternoon.
Ms. FRANKEL. I would like to introduce Linda Bell, who is the deputy director for Budget and Planning at the Institute of Museum and Library Services.
Mr. PORTER. I was just going to suggest that you do that. Welcome. Why don't you proceed with your statement, please.
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Opening Statement
Ms. FRANKEL. It is a pleasure to appear before you and the distinguished committee to discuss the President's budget request of $146,340,000 for the Institute of Museum and Library Service, Office of Library Services.
Last year, Congress increased our Federal funding for libraries by $10,000,000, and I thank you for showing such great confidence in this fine agency.
As the first director of the Institute, I am proud of what we have accomplished since we last appeared before you. I have learned so much about libraries in this past year. I have always used libraries, but I never thought about the variety of libraries and the complex issues that they face. I have learned about the different types, the public, the special, the research libraries—and the multiple services that they provide. I had no idea that technology played such an important role—unlocking whole new worlds for library users—online catalogs, inter-library loans, on-ramps to the Internet, and linkage of State-wide networks.
Technology is not replacing, however, the important sense of place that libraries create in their communities. I have visited a number of public libraries over this past year, and I am so impressed by their relationship to Head Start, by the evening hours that they provide for children doing homework and for adults being trained for job interviews.
I am so impressed by what libraries are accomplishing and proud to be their spokesperson here. I would like to spend a few moments telling you about our grant programs, and I will first mention our National Leadership grants.
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These competitive awards focus on four areas: education and training, research and demonstration projects, digitization and preservation, and library and museum partnerships. Countless museum and library professionals contributed to the development of these new guidelines, and the American Library Association has called the guidelines ''a model of accommodation and balance.''
The deadline for this program is just 16 days away, and we expect to be deluged with outstanding proposals, and I look forward to telling you more about this in September when we make our first awards.
Next, we have had a productive dialogue with leaders in the Native American Library Service. Through discussions, we have determined that Federal money could be well used to provide grants for technical assistance to help these libraries achieve professional standards. We are basing this program on a similar program that we have had in place for small museums, which has helped thousands of museums improve their public service. We will be able to measure the results of these programs after they have been in place for a year.
Finally, we have developed responsive and effective communication with the States. The Government Performance and Results Act is evident in all that we do. However, the most challenging aspect of implementation is in working with the States to, as you said last year, compare apples with apples and oranges with oranges. The States have taken up this challenge with enthusiasm, but I must tell you that the challenge is daunting. A complicating factor for us is that libraries are at the front line in the technology revolution, and technology is changing the way all of us have access to information, and the impact that that will have on libraries will be profound; yet, at this point, cannot be fully known.
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While we are in the midst of such great change, trying to develop measurement standards, it requires great efforts, as you can imagine. The project is daunting, and I heard Ms. Cantu say the word ''daunting'' as well. So I think it is really true. And the process is difficult and can be expensive, but we remain committed to encouraging that process along.
We have spent much of this past year in meetings with the chiefs of the State library agencies, working together to identify programs that cut across the States. Once these are established, we will attempt to identify ways to measure the impact.
I would like to also mention four ways that Federal monies are going to be spent in the IMLS grant programs, to expand services. The first, and above all, is for libraries. For libraries, public service is the key, and reaching out to the entire community is a priority. Young mothers in Tampa Bay, Florida, learned about the importance of reading to children, even before their babies are born. Born to Read incorporates parent education and the importance of literacy.
Second, technology is being used to serve people in very new and useful ways. A man in Jamestown, New York, was diagnosed with an inoperable brain tumor. Doctors told him he had only months to live. His wife was distraught, and she went to her local Jamestown library to do research on her husband's illness and the treatments that were available. The reference library showed her how to search the electronic health reference database. Using this technology, she stumbled upon a new treatment.
She took this information to her doctor, who then contacted the center with the new treatment. Her husband was able to receive this treatment, and he is responding well.
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Third, libraries are creating a sense of place while using sophisticated technology at the same time. Teens in Antioch, Illinois, were suddenly coming to the library in greater numbers, and everyone wondered why. New technology provided a welcome gateway to information, and it was very attractive to these young teens.
To help librarians meet the needs of their new patrons, the State is providing training to youth librarians with a specialty in technology.
Finally, libraries are entering into creative public-private partnerships that expand access to critical resources. Many of these programs spark public-private partnerships that extend the life of the program long after the Federal money is gone. A wonderful example of this is JobSmart in California. JobSmart is a web site that helps job-seekers get current, reliable, and local information about job openings.
Here is a testimonial from one of the 4,000,000 users of this award-winning site. ''This is the best and the easiest job site I have ever heard of. The others are either too disorganized and/or do not have enough information. This site is not only free. It comes from the public library. So I know that you have my interest at heart.''
I think that we should all be proud of the work libraries are doing across this country. I am optimistic about the reach and the accessibility of library service in our country, and I am confident that the Federal role helps to sustain and encourage public and private support for libraries. I would like to urge you to continue to make this wonderful investment, and I use the word ''investment'' in a real sense, in the Nation's libraries and to support the President's request of $146,340,000 for the Office of Library Services at the Institute.
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[The prepared statement follows:]
"The Official Committee record contains additional material here."
FUTURE OF LIBRARIES
Mr. PORTER. Ms. Frankel, before I call on Ms. Pelosi, could you do something for me? And that is, libraries used to be books on shelves, and they have become far more than that now, but can you look 20, 25 years down from now and tell us what you think a library might look like, a typical library in a typical town in America, 25 years out?
Ms. FRANKEL. Well, I think that many of them will look very much the way they still look on the outside, but on the inside, they are going to have a lot more technology accessible.
Plus, I think books will remain, and I think there will always be good places for people to read and people to talk to teach other, and there will be great community centers as well.
I think the accessibility that they will provide will be for people who do not have computers in their own home, and that will only increase. And I think that is terrific because we have seen in States like Illinois and in Florida just the ability to reach across the State and give people online capability to find out all kinds of information.
Mr. PORTER. Maybe the librarian of the future will be an expert in cutting through all of the data and finding what you want to find——
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Ms. FRANKEL. Yes.
Mr. PORTER [continuing]. Because there will be so much information. There is already so much information to reach——
Ms. FRANKEL. Yes.
Mr. PORTER [continuing]. A particular bit that you might want, and maybe we will have the capacity not to keep books on shelves, but to print them out as we need them for each individual so that we do not have any over-supply.
Ms. FRANKEL. I cannot imagine, but that is possible, sir.
Mr. PORTER. Yes. Who knows? I just wondered what you might think.
Ms. FRANKEL. Librarians have called themselves often ''information navigators,'' and I think that is exactly what you are talking about.
Mr. PORTER. Right. Yes, exactly.
Ms. Pelosi?
Ms. PELOSI. Thank you very much, Mr. Chairman. That was an intriguing notion or idea that you just presented us. I am trembling at the thought of the intellectual property ramifications. [Laughter.]
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BALANCE OF EVALUATION AND SUPPORT SERVICES
Ms. PELOSI. I love that.
Mr. Chairman, I am so proud of Diane Frankel and the work that she does at the Institute for Museum and Library Services. She was a constituent of mine, and will be, I guess, hopefully one of these days again, but, in the meantime, she is doing excellent work. She is a prize of our community, and we are so pleased that she was willing to have our entire country benefit from her experience at the Institute.
I used to be on the Library Commission in San Francisco. It was my first official capacity in the early 1970's when I had all of these little babies, and we wanted to build a new library in San Francisco. We lobbied for a new library, and I was thinking of it when you asked the question if you could project 25 years out. It was probably a good thing we did not succeed with our lobby efforts at the time because, even 10 years later, when a site was chosen and a new librarian was there with all of the knowledge and technology that become available, the library that we have today is certainly taking us into the future. I am not absolutely certain that would have happened if our initial lobbying had succeeded.
Now, Lord knows what that means for the future, but I think, technologically speaking, we are at quite a different place than we might have been if we had built a library 25 years ago. But this is an amazing thing. What are libraries? They are a place where we get information. They also afforded to many of us a level of serenity in our youth, to go there and read, and although information is very important and we want to make it accessible to everyone, still, hopefully, people will continue to read books.
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I do not know if it is healthy for them to read everything off the computer or what the ramifications are. They have implications for intellectual property laws that we are not even dreaming about right now.
In any event, in our family, what you do has a very high value, Ms. Frankel, and, therefore, I hope that the committee will at least honor the President's budget request.
I did have one question. As you mentioned, encouraging the library field to perform results-based evaluation is necessary, we all agree, yet very complex and expensive. With your limited budget, how do you weigh consideration between supporting evaluation and supporting services to the public?
Ms. FRANKEL. Well, I think that is a critical part of it. I think that is a critical question, Congresswoman Pelosi, because we do have to weigh how to use the limited resources.
As you point out, measuring things that are longitudinal—and you cannot say exactly what is going to happen when someone comes into the library, uses the information, and measure the results of that. It is very difficult. Privacy is also an issue when it comes to how people use the library as well, and so, while the States certainly are very interested in being able to pick measures that cut across the different States, we are working closely to make sure that the resources that we use—the limited resources are confined to things that we really can measure.
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Ms. PELOSI. I appreciate that answer. Thank you very much.
I was intrigued by some of the examples that you had used. We never talked about any of these issues at our Library Commission meetings in the early mid-1970's, just to show how far along things have gone in terms of accessing information about adopting a baby, and what I think some of us were reading to our babies before they were born. It was not as respected a pursuit as it may be now. So I applaud what Library Services are able to do, especially in underserved areas. That also points to the idea that we really do need to make sure that everyone has access to this information, and that has been a perennial problem even when the library was just books on the shelf. Now it is more so with the advent of the technology.
Thank you for your leadership.
Ms. FRANKEL. Thank you very much, Congresswoman Pelosi.
Ms. PELOSI. Thank you, Mr. Chairman.
ADMINISTRATIVE EXPENSES
Mr. PORTER. Thank you, Ms. Pelosi.
Ms. Frankel, you project that your administrative expenses for library activities will decline by over $1,000,000 and 25 percent in fiscal year 1999.
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Ms. FRANKEL. Yes.
Mr. PORTER. As the justification notes, the request for administration is less than 2 percent of your requested appropriation and less than the 3 percent set-aside permitted under law.
First, we want to congratulate you on your request. It is unique among agencies we have reviewed this year.
Second, we would like to encourage you to share your secrets with the Department and the other agencies that we oversee.
Third, I note that while personnel costs increased slightly, allocations for contractual services and equipment costs comprised the bulk of the decrease. Why are these costs decreasing, and do you expect that future requests for administration will remain substantially below the 3-percent statutory cap?
Ms. FRANKEL. Let me start with the first part of the question. The decreases in contractual services and in equipment really were because we had a transition year, and we had a great change in bringing people over from the Department of Education and making sure that we had equipment and we could move them and so forth, and we had a major change in our computer service.
I cannot say we will always remain at 2 percent, but we will certainly remain under the 3 percent. That is our goal, yes.
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Mr. PORTER. What happens to the money that you are not using for administration? Is that reallocated to State grants?
CARRY-OVER AUTHORITY
Ms. FRANKEL. Yes.
Mr. PORTER. Ms. Frankel, you are requesting that all funds appropriated for fiscal 1999 remain available until expended. Under the old authorization, only construction funding was made available under these circumstances. As you know, construction is no longer a permissible activity under the Act.
Last year, no part of the appropriation was made available on a no-year basis. The new authorization does not permit the appropriation of funds on a no-year basis. The justification does not indicate a rationale for this policy change. Why is the change necessary, and what would be the impact if we did not include the no-year provision in the appropriation?
Ms. FRANKEL. The implication for it, and the reason we have asked for it, is because if we have program funds that are not appropriated, it is really nice to be able to carry them over because we can just give additional grants the next year, certainly in the Native American program and in the National Leadership grants. So that would be the justification for it.
Mr. PORTER. Why would you carry them over?
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Ms. FRANKEL. Well, if you do not expend them. I mean, if for some reason——
Mr. PORTER. Why wouldn't you expend them, since they are grants mostly?
Ms. FRANKEL. Well, because, for example, if the Native American grant numbers did not come in and we did not have as many applications as we had anticipated, we might have a couple of—some money left over. We have done that in Museum Services from time to time.
Mr. PORTER. So this would not be contemplated to be a significant percentage of the money available?
Ms. FRANKEL. Oh, no, a very minimal percentage, but it just gives you the freedom to carry it over, so that if you do not expend it, you have it for the next year.
SYSTEMS INTEGRATION
Mr. PORTER. All right. Last year, we discussed your request to fully integrate your grants management system. Tell us generally, are all of your systems, including finance and grants management, now fully integrated to deal with both library and museum programs?
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Ms. FRANKEL. That is exactly what we have been working on through this whole year, and I cannot say it is totally completed, but it is at the point where people are working on it. Staff is working together very diligently to make sure that that will happen by the time we give out grants in Library Services.
[The information follows:]
Mr. PORTER. When will all of your systems, including finance and grants management, be fully integrated to deal with both library and museum programs?
Ms. FRANKEL. To fulfill the spirit of the Museum and Library Services Act (MLSA), the Director of IMLS is committed to providing high quality service while streamlining the agency's functions wherever possible. The creation of IMLS in 1997 provided many opportunities to pursue these goals creatively.
Procedures for the management of the new LSTA grant categories are in the process of being developed by Office of Library Services program staff in close collaboration with the Director of IMLS. Valuable guidance and input has been provided from the program staff of the Office of Museum Services in an effort to make use of procedures that work well for museum grantees that may be similarly effective for libraries. The National Endowment for the Humanities' Division of Preservation and Access has also generously contributed its expertise in the library field and library professionals and is providing advice on the establishment of review procedures for the new collaborative museum/library program.
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Management of IMLS has worked closely with the budget, finance, and legal offices of the Department of Education throughout this transition period to identify areas of responsibility to be provided by the Department until all former library program grants awarded by the Department are closed, as mandated by the MLSA. Through an interagency agreement, these services include the preparation of state allocation tables for distribution of state formula grants, management and payments of unexpended and unobligated balances of expired appropriations for library programs through 1997, and preparation of reports for Treasury and OMB, and other similar services. The Office of Library Services staff works closely with the staff of the Department in order to provide the clearest communication and technical assistance to library program grant recipients on matters concerning grants awarded prior to 1998.
In all day-to-day matters the new IMLS functions today as a fully integrated agency. In 1998 the agency's local area network was upgraded in order to unify the system under which all staff is working and to make all agency activities more accessible to the public. The agency is working toward a comprehensive new relational database to replace the outdated WANG system as planned. Input on development of new policies and procedures is elicited from all staff of the new agency both informally as well as through biweekly staff meetings. As a result, new procedures for staff orientation, in-house procedures, and communication have been developed. The full staff will participate in a retreat to address other avenues for improvement over the summer of 1998.
INDEPENDENT AUDIT
Mr. PORTER. Does the Institute contract for an annual independent audit?
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Ms. FRANKEL. We do not.
Mr. PORTER. If not, why not?
Ms. BELL. We do receive an internal audit through the auditing that is done of the National Endowment for the Humanities' internal services. Many of the administrative areas of that agency also service ours as well. So, as they are audited, so are our services in finance, administration, personnel, and some other areas.
Mr. PORTER. Can you provide a copy of the audit to the subcommittee?
Ms. BELL. Sure.
[The information follows:]
IMS is provided the services for audit and investigative coverage, as well as Information Resources Management and accounting services, through an interagency agreement with the National Endowment for the Humanities. Through this agreement, IMS is also included with the annual evaluation undertaken by the National Endowment for the Humanities in which internal control and financial systems are evaluated. In 1997, no material weaknesses or material non-compliance were found.
A copy of the most recent semiannual report to Congress which details the inspector general's investigation of internal services is hereby provided for your reference, as promised in our hearing held April 1, 1998.
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"The Official Committee record contains additional material here."
GOVERNMENT PERFORMANCE AND RESULTS ACT
Mr. PORTER. Ms. Frankel, even the Institute has to answer GPRA questions.
Ms. FRANKEL. Yes, we do.
Mr. PORTER. I understand that because you are a new agency administering new programs, you may be a little behind the other agencies. Your process is also unusually collaborative, which we appreciate.
Will you tell us generally when you expect to have chosen indicators, baselines, and targets for library programs?
Ms. FRANKEL. We are working with the States, and our hope is by August of this year.
We have just finished an analysis of the State plans, a content analysis, and we are distributing that to the States. And our hope is that by August of 1998, we will have those in place.
Mr. PORTER. You have had ongoing discussions with the staff about GPRA. The goals of your authorizing statute generally relate to the capabilities and resources of libraries.
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We are more concerned with end users; in this case, the general public. To the extent that you can, we would like you to tell us how many people are using library enhanced resources and what benefit they are deriving rather than describing the quality and quantity of the new capabilities. Further, we strongly encourage you to collect data in comparable formats, so that we may be able to compare data across the States.
Will you describe generally the process you are undergoing to develop your GPRA plan, and will you tell us the type of indicators you expect to select and the types of quantitative measures you expect to adopt?
Ms. FRANKEL. Well, I would like to do that for the record since, again, we are really working diligently on that and have not completed the process.
[The information follows:]
Mr. PORTER. How are you ensuring that GPRA data will be collected in comparable formats so we develop a national picture of libraries rather than 50 separate state pictures?
Ms. FRANKEL. The State Programs are designed to be flexible, which means the states are choosing to implement different programs. States have different needs and different resources.
Despite this, we are working with the Chief Officers of State Library Agencies (COSLA) to establish a format to standardize reporting of LSTA activities. One COSLA committee has surveyed the states to determine what data could be collected. Another committee is being formed that will help address terminology so we can use a common vocabulary to discuss and report their programs. A matrix to structure reports of selected programs is being designed in collaboration with COSLA. The goal will be to provide in-depth information on outcomes in projects being implemented by a number of states. We are also discussing a pilot project to better address the evaluation of outcomes.
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There are a variety of studies being implemented and data being collected (FSCS/NCES for example) to provide a national picture of libraries. We will be working with these groups to incorporate their findings into our reports and plans.
NATIONAL LEADERSHIP GRANTS
Mr. PORTER. Page 8 of the justification indicates that you intend to award 20 new national grants in fiscal year 1999, but page 3 indicates that you will award 50 new grants at about $110,000 each. Which one is correct?
Ms. FRANKEL. Fifty is the answer, and 20 will be model projects.
Mr. PORTER. Model projects, all right.
Are the national grants multi-year or single-year grants, and what is your rationale for your policy?
Ms. FRANKEL. Potentially, people can use the money up to 2 years. We really want them to be excellent programs, and sometimes you cannot determine how you are going to spend that in one year. We want to give people the opportunity to spend it over a 2-year period. I think it makes much more sense.
Mr. PORTER. How is the Institute ensuring that the national grants will be collaborative efforts involving both museums and libraries?
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Ms. FRANKEL. We have four different areas, as I mentioned before. One of those areas is collaborative programs between museums and libraries, and those grants will come in and be reviewed by peer panels of museum and library people. As well, money is coming from both sides of our budget, from both the library and the museum side, to ensure that.
Mr. PORTER. The justification indicates that you anticipated receiving 200 applications for national grants. What was the actual number you received?
Ms. FRANKEL. We do not know. It is not on until the 17th, and I——
Mr. PORTER. Oh, that is right. You said that.
Ms. FRANKEL. And I have a feeling that we are going to receive many more than that.
Mr. PORTER. Do you know how many you have received so far?
Ms. FRANKEL. Yes. One, from the State of Georgia.
Mr. PORTER. One. So you expect them all to come in at the——
Ms. FRANKEL. They will all come in on the—yes. They—postmarked on the 17th.
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[The information follows:]
Mr. PORTER. The justification indicates that you anticipated receiving 200 applications for national leadership grants. What is the actual number you received?
Ms. FRANKEL. We are currently reviewing about 250 proposals submitted for FY 1998, with total funding requested exceeding $42 million.
DISPOSITION OF NO-YEAR FUNDS
Mr. PORTER. You testified last year that you anticipated carrying forward $24 million in FY 1997 funding related to construction activities to FY 1998. What is the disposition of that funding, and do you anticipate any carryover into 1999?
Ms. FRANKEL. We carried it over. We had to get quite a bit of it out in the draw-downs that were appropriate. We do have money that we are carrying over into this year, and I will report back to the record about how much we will be carrying over into 1999.
Mr. PORTER. Shouldn't that have been in your justification, the carryover?
Ms. BELL. Since the funds were awarded prior to the creation of IMLS, we did not feel that it related to our request for new funding for this agency. We can provide a status report on the disposition of those funds in whatever manner you would like.
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[The information follows:]
Mr. PORTER. What is the disposition of all no-year funds available either to the Department of Education or the Institute of Museum and Library Services?
Ms. FRANKEL. We are confident that the Department of Education is determining the outstanding balances to be transferred as expeditiously as possible. Some unexpended funds in the former LSCA program were transferred from the Department of Education to IMLS at the end of 1997, and continue to be transferred in fiscal year 1998. We do not know how much remains to be transferred or when the final transfer will be made; in the meanwhile program, budget, and accounting staff of IMLS have developed streamlined procedures so that grantees are able to draw down these funds after they have been transferred. We understand from grantees that this process is working smoothly in 1998.
The amounts of funds transferred from Department of Education through 5/1 are as follows:
9/30/97: $18,791,474.08 (Indian, Native Hawaiian, and Public Library Construction).
9/30/97: $10,490,809.81 (Indian, Native Hawaiian, and Public Library Construction).
9/30/98: $15,587,042.61 (Unobligated and unexpended FY97 Public Library Construction).
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3/20/98: $697,043.88 (Indian, Native Hawaiian, and Public Library Construction).
4/02/98: $13,944.46 (Native Hawaiian construction funds).
Total: $45,580,314.84.
ACCOUNTABILITY & EVALUATION
Mr. PORTER. All right. Last year, I asked you about the increased evaluation and accountability required by the new Act and how such accountability would be incorporated in the GPRA process. You responded that these activities would be determined through collaboration with State agencies. Can you tell us more specifically today how accountability and evaluation will be integrated into the grant-making in the GPRA process?
Ms. FRANKEL. All of the programs do have an evaluation component that the States give out which goes back to our performance indicators that we will choose with the States. The States are very aware of that, and they understand that it is important to identify not only outputs, but outcomes. So, again, those are being integrated into the way States will be reporting.
AMOUNT OF GRANTS AWARDED
Mr. PORTER. Last year, the justification indicated that the Institute would make 108 State grants in FY 1998 compared to 54 in FY 1997, and you testified that the additional grants were related to the carryover construction funding.
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The budget justification for FY 1999 indicates that only 59 State grants will be awarded in fiscal year 1998. Why has the fiscal year 1998 number declined again, and does the Institute intend to carry forward construction funding?
Ms. FRANKEL. We are giving the grants to the States and to the territories, and those are the primary grants. Again, we will be giving grants, but the States draw down the money at their own rate, and so we are never quite sure how much will be drawn down in a particular year, but we can give that to you for the record as well.
CONCLUSION
Mr. PORTER. The staff questions began by saying we find this to be generally a very well-run agency and have difficulty developing a full complement of hearing questions, you might be interested to know.
Ms. FRANKEL. Thank you very much.
Mr. PORTER. Our staff feels that, obviously, you are doing an excellent job, and I feel the same way——
Ms. FRANKEL. Thank you.
Mr. PORTER [continuing]. Based upon our meeting and the answers you have given today, and we thank you for doing that fine job——
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Ms. FRANKEL. Thank you very much.
Mr. PORTER [continuing]. And for coming here to testify. We have run out of questions to ask you, and, obviously, you are doing very, very well, and we appreciate that.
Ms. FRANKEL. Thank you, Congressman Porter.
Mr. PORTER. Thank you, Ms. Frankel.
Ms. FRANKEL. We appreciate it.
Mr. PORTER. The subcommittee will stand in recess until 10:00 a.m., April 21st.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Wednesday, April 22, 1998.
SOCIAL SECURITY ADMINISTRATION
WITNESSES
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KENNETH S. APFEL, COMMISSIONER OF SOCIAL SECURITY
DAVID C. WILLIAMS, INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION
Introduction of Witnesses
Mr. PORTER. The subcommittee will come to order. We continue our hearings on the budget for the fiscal year 1999 and welcome Kenneth Apfel, the Commissioner of the Social Security Administration.
Mr. Apfel, we are very pleased to welcome you before the subcommittee for the first time in your role as Social Security Commissioner. We know you well from your previous lives at Office of Management and Budget [OMB] and Department of Health and Human Services [HHS]. I served on this subcommittee a long time under the chairmanship of Bill Natcher. Every year he would tell the Health Care Financing Administration [HCFA] Administrator that he or she had the third hardest job in Washington. We were never told what the other two were. I think that perhaps you now may have the third hardest job in Washington, and I still don't know what the other two are. You not only have to deal with the long-term issue of solvency, you have to manage an agency that has undergone dramatic work-force downsizing and has substantial performance problems.
I hope you will take the opportunity in your first appearance here, either in the course of your prepared testimony or immediately following it, to give us a brief idea of the direction you intend to lead the agency and to tell us what you see as your major challenges, your major opportunities and your major priorities as the new Commissioner. We would be pleased to hear your opening statement.
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Opening Statement
Mr. APFEL. Thank you, Mr. Chairman. It is a pleasure to be here again before this subcommittee.
When I was appointed the Commissioner of Social Security, I established priorities for the agency. The first was to work toward resolving the long-term financing issue facing the Social Security program. As you know, the President has put in place a process that can lead to a national consensus and bipartisan action on meaningful reform. I can think of no more important issue facing this Nation. I will be designating a significant amount of my time personally, as well as the agency's, towards this endeavor.
The other priorities I identified for the Social Security Administration (SSA) were to improve SSA's policymaking process and long-range planning processes. These are particularly important now that the Social Security Administration is no longer part of the Department of Health and Human Services (HHS), as well as to provide responsive and equitable service for all claimants and beneficiaries, and to ensure the integrity of our programs. This budget request reflects an emphasis in each of these areas. I will outline those momentarily.
First let me place this budget request in context.
SSA's overall fiscal year 1999 budget totals $427 billion. More than 90 percent of this amount is permanently appropriated and will be paid out in retirement, survivors and disability insurance benefit payments. The appropriations request we have before you today covers our overall program administration costs of $6.448 billion, and our-general-fund financed programs cost of $31 billion, which is primarily for Supplemental Security Income [SSI] benefit payments.
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First let me turn to the major discretionary spending request before this subcommittee, the Limitation on Administrative Expenses [LAE] account. Our FY 1999 request for $6.448 billion includes $6.043 billion for basic day-to-day operating expenses and $405 million in funding to conduct additional continuing disability reviews [CDRs], as well as redeterminations of nondisability factors of SSI eligibility.
Our budget request includes two legislative proposals that directly affect our administrative budget request. The first is a representative fee proposal that authorizes SSA to assess claimant representatives the cost for services that the agency provides to them. We estimate that $19 million in assessments would be collected from claimant representatives in 1999 and $26 million for each year thereafter. These funds for SSA administrative expenses are dependent upon congressional action.
The second legislative proposal relates to SSI nondisability redeterminations. This proposal, which is part of the CDR cap, would give us authority to conduct additional redeterminations of the nondisability factors for SSI eligibility and reduce the number of incorrect SSI payments. We project that this $50 million investment will lead to $216 million in program savings over a 5-year period. We must manage the SSI program better. This proposal will give us a better SSI program on integrity issues.
Even with this additional $69 million from these proposals, our request reflects an increase of only $39 million over our 1998 funding level, about .6 percent. This administrative budget request also represents less than 2 percent of our overall program cost.
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As I noted earlier, I established several agency priorities upon being named Commissioner. Two of these were to improve our policymaking process and to improve our long-range planning efforts now that we are no longer part of HHS. Strengthening the agency's policymaking process is essential if we are to effectively address the central issues facing our programs, such as long-range solvency and changing national demographics. I have recently created a new executive position for a Deputy Commissioner for Policy to help in this endeavor.
Similarly, the long-range planning by SSA fulfills the current strategic management and accountability standards of the Government Performance and Results Act. But our strategic planning needs to be strengthened to ensure that the agency is ready to handle the administrative challenges represented by the retirement of the baby boomers.
Since becoming an independent agency, SSA has taken steps to strengthen its research, evaluation and policy analysis infrastructure. But we need to do more. Our 1999 budget request of $30 million will focus on long-range solvency issues, the impact of looming demographic changes on future workloads, and the development of effective return-to-work strategies for disability recipients.
The budget will also support another priority, providing responsive and equitable service to our claimants and beneficiaries. I am pleased to report that, last year, we met or exceeded the performance commitments in the areas of disability claims, CDR case processing, 800-number service, Personal Earnings and Benefit Estimate Statement [PEBES] issuance, automation for front-line employees and reducing waiting times in our field offices. This request funds initiatives that are key to maintaining and improving world class service and to help shape an agency that works better and costs less.
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As you are aware, the redesign of the disability process is also critical and central to our efforts to improve service. I believe it is critically important that we push forward with this initiative to achieve long-run results. While the final redesigned disability process will not be exactly what SSA originally envisioned, it will be a process that improves the service that SSA provides to claimants with disabilities from their first contact through final administrative appeal. I know we have been testing these initiatives for several years within Social Security. It is my strong desire and conviction that we move beyond the testing stages and into the implementation stages later this year. That is going to take some tough decisions, and I am sure some stresses and strains everywhere, but I believe it is time to now move forward, make decisions and put them in place.
Another priority is assuring the integrity of our programs. In this regard, I would like to thank the committee for providing additional funds for the continuing disability review [CDR] workloads. Taxpayer-financed disability benefits should go only to those who are entitled, and CDRs help ensure program integrity. In 1997, SSA processed more than 690,000 periodic review CDRs, a 38 percent increase over the previous fiscal year. We project that 1.6 million will be conducted in 1999.
The legislative proposal that I noted earlier, which provides the agency with authority to conduct an additional 268,000 redeterminations of nondisability factors of SSI eligibility, is also of critical importance to program integrity. It will help improve the SSI program integrity by reducing the number of incorrect payments.
We are also developing an SSI Management Improvement Plan that focuses on enhancing payment accuracy rates, increasing fraud prevention and detection, and improving our debt collection activities.
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The Office of Inspector General [OIG] remains the focal point for program integrity efforts. The OIG will continue to focus its audits and investigations on SSA's four core business practices: enumeration, claims, earnings and postentitlement, as well as on SSA's financial and general management. Our 1999 budget request of $52 million for the OIG will support this effort. If Congress approves the IG budget request, the investigative staff will have doubled since 1995, a very important initiative that this committee has helped with enormously.
Finally, let me say that this budget request is in keeping with the President's emphasis on fiscally responsible government. Equally important, it supports the President's commitment to one of the Nation's core values: providing financial security for older Americans and for American families after the death or disability of a wage earner.
Today, more than 144 million workers and their families are protected by Social Security. More than 30 million people receive retirement benefits; 7 million receive survivors benefits; and 6 million receive disability benefit payments. The President has said that we should work to strengthen and protect this venerable program for the 21st century while maintaining our hard-won fiscal discipline. Our administrative budget request—$6.448 billion, including the $69 million dependent upon congressional action—is the minimum level of funding needed to support this endeavor.
I have submitted a written statement for the record, and I will be happy to answer any questions that you have, Mr. Chairman.
Mr. PORTER. Mr. Apfel, thank you for your excellent opening statement.
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[The statement of Mr. Apfel follows:]
"The Official Committee record contains additional material here."
DISABILITY CASE PROCESSING
Mr. PORTER. We had a talk yesterday about Social Security reform and about the tight budget that you have sent to us. You impressed on me the need to adequately fund your administrative budget to avoid organizational chaos at a time when we may be entering wide-reaching reforms. I will make every effort to do that. In return, I have to have your commitment that you will be going to remedy the substantial performance issues we have been dealing with for years. I have to count on you not only to be a top idea person, but to be a very strong manager as well.
It will not come as a surprise to you that I am very concerned about the disability case processing. Your testimony includes a table that indicates SSA processed about the number of cases you had estimated you would. The number of cases pending and initial processing times were well below estimates primarily because you received far fewer claims than were anticipated. You expect these targets to increase slightly for fiscal year 1998 and 1999.
The real problem is still in hearings. In 1997, the agency processed fewer hearings than anticipated, had more hearings pending, and the processing time increased by 11 percent to almost 400 days. I understand the full cycle time on a disability case is over 600 days, or almost 2 years. This is simply unacceptable. Your performance plan indicates that processing times will decrease substantially in fiscal year 1998 and fiscal year 1999, but the agency's track record in predicting this target has been, in the past, poor.
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Mr. Apfel, some progress can be made in this area without implementing redesign proposals, but real progress will come only with reform. You touched on this. But when will you make a decision to roll out a redesigned system, and what is your schedule for actual implementation?
Mr. APFEL. Mr. Chairman, the resources that have been provided by this committee have helped us work down that waiting time. If we look at the Office of Hearings and Appeals, the nearly 2,000 FTEs that we have shifted over are starting to pay off with some results. We have actually hired a couple of hundred extra ALJs.
On the resource issue, we believe, which I think is the number one issue, first issue, is: are the resources there now to handle this issue? I think they are. I think the dollars, the appropriate level of resources, are now within the Office of Hearings and Appeals to start to work on this issue. Certainly it takes some time after you hire a bunch of new people for efficiencies. That is happening now. I swore in several months ago the last group of new ALJs. I think we will see some real results in terms of activities.
But you go to the issue which I think is a much more important one, which is what are we really going to do about the overall process? As you know, this administration has committed for several years to a redesign process that I strongly support in principle. A number of tests have been conducted on a number of different parts of this. It is my strong conviction that we need to move out of the testing stages through active decisions by the end of this year and start the actual implementation of a redesign process next year. That is my time line, to be able to assess all the pilots that are out there and the information we have.
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And it is going to be, in part, an easy call, I think. Other parts are going to be tougher calls. We are not going to have all the information we would like. But if we wanted to wait another 2 years and do more fulsome pilots, we would have better information to make decisions, but it is my belief that rather than that, we need to start moving into the final decisional stage.
I would expect to be making decisions at the end of this year for the start of implementation next year on the redesign process on a couple of different fronts, both on how we can strengthen process unification activities, as well as how do we redesign workloads within OHA and State Disability Determination Services [DDSs] to handle work.
Mr. PORTER. The difficulty for this subcommittee, and obviously you are the new Commissioner, but the agency has promised improvement in disability since well before the time I became Chairman, and I have been Chairman 3- 1/2 years now. We have talked about this a great deal. We simply have not seen the improvements come about. While you cannot be held responsible for that, obviously you are placing this at a high priority, we simply want to urge you to do everything you possibly can to reduce initial case processing time, reduce the time taken through hearing processing and the total cycle time. It seems to us 600 days is just disgraceful. No citizen in this country should be put through that kind of wait to have a determination made. I know that you agree with that and are addressing this issue as best you can.
Mr. APFEL. I entirely agree with that, Mr. Chairman.
REFINING PERFORMANCE INDICATORS
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Mr. PORTER. Mr. Apfel, I want to commend you on the agency's achievements with regard to the indicators for which you obtained your commitments. I think we now have to refine some of the initial indicators we selected to encourage better balance in the agency management and to obtain a more comprehensive picture of agency performance.
As I mentioned earlier, we have been looking at certain components of the disability process that we consider particular problems, but as the agency focused resources on reducing processing times at certain stages of the process, other stages have been neglected. The result, I understand, is that overall cycle time has not improved even though processing times for certain stages have changed.
Likewise we focused on the agency's ability to respond to 800-number calls. As resources were shifted to the teleservice centers, we lost track of the fact that field offices were increasingly unable to answer their incoming calls. We take the blame for these deficiencies.
Are there problems you see with the current Government Performance and Results Act [GPRA] measures, and do you concur with my assessment that the performance plan should be refined?
Mr. APFEL. I think the performance plan should be refined, and I think we are always looking at new performance measures to measure our performance. One of the achievements of the Social Security Administration is the establishment of solid performance measures. That has frankly been, at least in part, due to the efforts that you have pushed this agency to do with the Porter commitments.
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I would say that expanding the number of performance measures is a very important thing for us to look into. I can tell you this is an agency that follows those commitments very carefully. They are discussed at my executive staff meetings on a regular basis on where we stand. So establishing quantifiable performance measures is the right thing for this agency to do. It was the right thing for it to do, and we should improve it. I am proud of the activities that this agency does to try to live up to its commitments.
Are there areas that we should continue to develop new performance measures on? I would say yes. I agree with your assessment that we need to improve it. If we look at the performance plan, this is an area that there are questions about, whether there is a need for added quantifiable measures that have been raised. We will look at that and figure out what we can do to improve it.
INSPECTOR GENERAL AND GPRA INDICATORS
Mr. PORTER. Thank you, Mr. Apfel. Because we didn't have time this year for a separate hearing with the IG, I would like to ask a couple of questions of Mr. Williams directly, if I may.
Mr. Williams, we are asking all the IGs to participate in GPRA in two ways. First we would like to provide some management consulting. We would like you to provide some management consulting for the subcommittee. We have asked you to review the GPRA indicators and to recommend modifications to us. Second, we have asked you to develop a plan to, in effect, audit the collection and reporting of GPRA data.
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Would you describe generally the plan you have developed for us and submit a comprehensive answer for the record?
Mr. WILLIAMS. Yes, sir, we would be very pleased to do that. If you would like, I can give you a brief overview of it now and a more extensive one in writing.
[The information follows:]
PLAN TO AUDIT PERFORMANCE MEASURES
The Office of the Inspector General has adopted a four point approach to reviewing SSA's performance measures 1) assess SSA's system capacity to produce performance data; 2) assess whether reported performance measure data is valid; 3) ensure that SSA has the appropriate measures to indicate vitality of its programs; and 4) ensure that the performance measures fully capture the program segments that they are intended to capture.
Our Office of Audit has already begun to address all of these points. The audit team that is responsible for monitoring the implementation of GPRA has begun to evaluate the data sources that are being used to measure performance. We believe that a performance measure is only as good as the data behind it. The GPRA issue team plans to review SSA's data capacity for all of its performance measures, including the Porter commitments to ensure that they provide accurate and reliable information.
We recently completed our first audit that reviewed the data used for a performance measure. We examined the system used to measure the timely issuance of Social Security number cards. Our audit revealed that there were flaws in the data (i.e., the math did not add up) used to assess how quickly SSA processes Social Security number cards that could result in an inaccurate reporting of performance in this area. This first completed effort displayed the need to review all data sources being used to measure performance. Audits and evaluations will help ensure that the performance data reported by the Agency are accurate and valid. The Office of the Inspector General has other similar audits and evaluations currently underway and more are planned for the immediate future. In addition, we will also assess SSA's Performance Plan for FY 1999.
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Mr. PORTER. Please.
Mr. WILLIAMS. We have created a team, in New York, of auditors that will focus on the implementation of the GPRA work. Our team intends to focus on four central questions with regard to each of the 67 measures. We first want to find out if the agency has the capacity to produce the performance data, the so-called systems capacity. We then want to look at the measure and to assure ourselves that it is the proper pulse point that will measure the vitality of that program, and that they are the best measures for each of the programs. We also want to make sure that the measure captures the program segment that it tells us it does, rather than a fragment of it and that it represents what they are actually measuring. And the last is whether the measure is valid, whether the math adds up with regard to the level of performance.
As I said, there are 67 measures. We have the team. We will be working on those measures through our audit cycle. Our normal audit cycle is a 5-year period before we get back to the first one where we began.
The second effort that is going on is we are tying performance to the budgeting effort. I know you are well aware of that through the Results Act. And we are working with the agency to assure that each of the programs measures its actual cost so that decisionmakers and the public can understand what they are receiving for the money invested in each program. The agency is aware and we are working with the agency to try to make our cost accounting system strong enough to comply with GPRA. That will be a vigorous effort that will be occurring between the agency and our financial team. That brings our second audit team for GPRA. We are prepared to provide an initial briefing to you and to your staff. We will certainly provide that in writing as well.
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[The information follows:]
TYING PROGRAM PERFORMANCE TO THE BUDGET PROCESS
We believe that one of the main goals of GPRA is to tie program performance to the budget process. This fact has been highlighted by the Government Performance and Results Act Amendments, passed by the House of Representatives on March 12, 1998. The Amendments, in part, call for the Office of Management and Budget to require all Federal agencies to have performance indicators that include a determination of full costs of each program activity, as defined by the Statement of Federal Financial Accounting Standards (SFFAS) Number 4. The Office of the Inspector General is working with the Agency to strengthen its Cost Accounting System (CAS) to ensure compliance with the requirements of GPRA.
Changes are needed in the CAS. Previous work by Price-Waterhouse highlighted problems with SSA's cost assignment methodology and CAS. Price-Waterhouse found that modifications would be necessary to bring the CAS into compliance with SFFAS Number 4, which establishes Managerial Cost Accounting Standards, as well as provide the data necessary for the proper implementation of GPRA and the Chief Financial Officers Act. Price-Waterhouse concluded that SSA's cost assignment methodology was not equitable and accurate and that the CAS was inefficient and in need of significant modifications. Price-Waterhouse further concluded that the CAS did not provide cost information to promote improvement in SSA's operating efficiency.
In response to these findings and our own concerns, we are working with SSA to strengthen its cost accounting information. For example, our FY 1998 Chief Financial Officer's (CFO) audit includes steps to review SSA's cost accounting system and determine its impact on cost data reported in the Agency's annual accountability report. There is no assurance that the initial Price-Waterhouse audit and our CFO audit identify all of the deficiencies within the Agency's cost accounting system. However, we believe these audits will provide essential base-line data that will direct more in-depth audits of the Agency's cost accounting methodology.
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DISABILITY FRAUD INITIATIVES
Mr. PORTER. While I have you here, Mr. Williams, I have one other question. What initiatives have you undertaken to deal with disability fraud, and what actions have you taken or what recommendations have you made to improve disability case processing?
Mr. WILLIAMS. As Commissioner Apfel said, this committee has been largely responsible for our ability to expand our investigative services. With that expansion came a heightened interest on the part of our employees in SSA and the public to get involved as well in the seamless attack on fraud. For instance, our hotline this year is receiving about 65,000 allegations of fraud as contrasted with 18,000 last year and only 800 in our first year. We have opened about 5,400 criminal investigations, which is up from about 1,000 when we began. Our criminal convictions have risen from 500 to 2,500 over the past year as a result of the arrival of the new resources. Disability fraud has been targeted as a top priority for us. We have doubled our number of disability convictions over the last year.
We are supporting all of this with nationwide operations that we have made your staff aware of, and that have been targeted at disability fraud. One operation that is ready to launch is Operation Contender, which puts State and IG investigative units inside the DDSs. We think the first thing that will result from that is that we will find claimants that are making fraudulent claims. We hope, though, to find service providers, attorneys and doctors, as a result of that. That is the main reason for their being there. That flowed from a Washington State project in which we found 600 Cambodians that had been involved in suspicious fraudulent claims for disability, and there are 31 convictions to date on that project.
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Some of our other operations, Border Vigil caught 156 recipients that were pretending to live in the United States but actually did not and were receiving benefits improperly. Water Witch was another operation. We have found 300 fugitives to date on that brand new operation. Many of them have also been apprehended. They have all been cut off from disability and other kinds of benefits.
The thing that we are most concerned about is employee fraud. We are focusing on the disability processing and adjudication systems at SSA, making sure that they are clean and free of fraud. And if there are allegations, assuring that we respond very quickly to those.
Mr. PORTER. Thank you, Mr. Williams.
Mrs. Lowey.
WOMEN AND SOCIAL SECURITY REFORM
Mrs. LOWEY. Thank you, Mr. Chairman, and welcome, Commissioner Apfel.
I was very interested in the op-ed by Kathleen Feldstein of the New York Times last week. I don't know if you saw it. I think the whole issue of women and Social Security has been one that has concerned many of us over the last years. Her op-ed was particularly interesting when she noted that although the current Social Security system doesn't fully recognize the differences in work patterns between men and women, the reform proposals to establish a system of personal retirement accounts would not necessarily end this disparity.
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Monthly retirement benefits for women average about 25 percent less than men's, I understand, according to the information I have, and even though women's labor force participation has grown dramatically, they still take time out for child rearing, to care for elderly parents much more commonly than men, and their wages are also on average lower than that of men.
Additionally, if you look at the article, a married couple can receive 150 percent of the benefits to which the higher earner is entitled. A widow is entitled to receive 100 percent of the benefits of her husband.
I can go on and on. You know all the specific facts. But the bottom line is that women are greatly disadvantaged. I wonder if you can offer a perspective to us as to how some of the reform proposals will affect women in light of their labor force attachment and earning disparities compared to men.
CURRENT STATUS OF WOMEN UNDER SOCIAL SECURITY
Mr. APFEL. Thank you. The current Social Security system is gender-neutral, but Social Security provides currently a number of very important features that help provide support for women that I think need to be reiterated first.
When we look at the life expectancy issues, with women living longer than men, the inflation-protected benefit that Social Security provides is a centrally important feature that provides a benefit that women can count on even after the loss of a spouse for as long as they live, even if their savings are gone. As you pointed out, there are the widows and the spousal benefits that Social Security provides.
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I would also point out, as you did, the importance of the progressive benefit structure that Social Security has that provides higher replacement rates for lower-wage earners or for people who haven't been in the labor force quite as long. That helps provide a higher level of support for women who are working if they are earning less than men. So there are very important features the current Social Security system has for women.
PROPOSALS TO MODIFY SOCIAL SECURITY
But one of the issues that needs to be talked through is whether the Social Security system should modify to some extent the payments that are provided for working spouses given the changes in the labor force that have taken place over the course of the last 20 to 30 years, whether a higher proportion, or greater earnings sharing should be provided for benefits or a higher level of support. Possibly also the widows benefit, whether the widows benefit should be modified. If we look at the average income of an 85-year-old widow, it is about half the level of a 65-year-old single woman now. Income is a very major feature for very elderly women.
If we look at individual accounts, there are a number of issues that we need to think through in terms of individual accounts in terms of women. Given the lower earnings rate, that means lower accruals potentially into an individual account. And also given higher life expectancy, longer life expectancy, if the amount that is accrued, will that be sufficient to cover the person through that longer life expectancy?
So the whole issue of whether—if there should be annuitization of individual accounts, if that is one of the things that is out there, how would that have a gender impact? Should there be requirements that all people, men and women, receive the same annuitization so that women's wouldn't be lower than men's? These are all issues that have to be thought through as we enter this debate.
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In addition, what needs to be taken a look at, on all the different proposals that are out there, we need to be able to provide information on the distributional impact by race and also by sex. If we look at, say, the proposals for increasing the retirement age or for increasing the number of years that a person would pay into Social Security for the determination of benefits, how would that affect different groups? It is our hope that some of the research that we are doing with our research budget and some of the work in our policy office can help shed light on all of these issues in the course of the year ahead.
We are starting a major debate in this country. I believe it is the single most important debate that this Nation faces as we look at the aging of our society. There are a number of major ideas that are now on the table. What the President has called for is an open discussion, an open discussion of the trade-offs of all of the different options that are out there. The way to get to that open discussion is to understand how different things, different ideas, will affect women, minorities, lower-wage earners, upper-wage earners, et cetera. We hope to be able to provide that from Social Security as this debate unfolds.
Mrs. LOWEY. I appreciate that, because I was very interested in Kathleen Feldstein's article, but this is an issue, as you know, that has been debated for quite a few years. I would appreciate any information you currently have that would reflect some light on this. When Social Security was first designed, more women were staying at home, certainly, than were in the work force. The statistics have changed drastically.
Mr. APFEL. Absolutely.
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SENATOR MOYNIHAN'S SOCIAL SECURITY REFORM PROPOSAL
Mrs. LOWEY. I think we have to certainly make Social Security relevant to the reality. I would appreciate that information.
Commissioner, I would be interested if you could offer your thoughts on Senator Moynihan's Social Security reform proposal. You were quoted in the National Journal last week as saying that the Senator's proposal does meet the test established by the President of ensuring the Social Security system's long-term stability. You also said that for those who want to radically privatize the Social Security system, his proposals would be anathema. Would you comment?
Mr. APFEL. Yes. One of the priorities that the President established for the use of the surpluses was the Social Security system would be saved first. There are some proposals that have been discussed to use the surpluses for other activities, not for fixing the Social Security system. One of the tests that the President established was that we need to reform the Social Security system so it will be there for generation after generation. Senator Moynihan's proposal does meet that test. It establishes long-term solvency for the Social Security system.
The President also said that we need to have a benefit that people can count on, no matter how long they live, even if they have outlived their savings or their retirement. Senator Moynihan's proposal does establish a continued benefit that people can count on.
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There are also issues that deal with, say, the adequacy of the benefit that need to be assessed in the Moynihan proposal. There are individual features of the Moynihan proposal that need some careful consideration. The 1 percent CPI would be one; the increase in the retirement age would be another.
The administration has not at all endorsed the Moynihan proposal and has not concluded that this is the right overall approach, but believes that it does provide a whole series of important ideas for discussion that should be on the table as we talk through this issue. It is within that context that my comments were offered to the National Journal.
800-NUMBER SERVICE
Mrs. LOWEY. If you could also share with the subcommittee how the agency's toll free 800 number has improved services to Social Security recipients and others, and how will your budget request affect the service that callers to the 800 number receive?
Mr. APFEL. The budget request maintains the current level of services for our 800 service. The same level of overall staff support will be provided. We get about 65 million calls a year now. It is a very important activity. Our goal is, by the year 2000, to be able to use the 800 service when an individual calls in for a retirement claim, that on that actual call, that the whole claim would be able to be taken. That is going to take some added work. I believe we can meet that by the year 2000.
We are trying to improve service within our current levels of activity. We have, as many know, increased the number of individuals not only in our teleservice centers, but that are in our processing centers who are available during high workload demand times for the 800 number. This is something that we have got to be able to do. This is a very important service to the American public. Our field offices are centrally important, but so is that 800 number.
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Actually Chairman Porter had mentioned about the telephone service in local offices. I wanted to say this is another area that we need to improve beyond the 800 service, which is how do we establish a better telephone mechanism within our field office structure? We will be investing, this year and next in upgrading virtually all of the telephone services for all but some of the very smallest offices—I haven't yet decided what to do about the smallest offices—but to invest, to upgrade those telephone systems so that we will have a better communication mechanism with the public both in our field offices, consistent with what the Chairman said, as well as our 800 number. So staff resources for the 800 number will be about the same. We will have spike services available for increased demand, and our projected goal is higher levels of service delivery by 2000 by being able to—on a one-time basis be able to have someone be able to get a claim done from that first telephone call to the 800 number.
Mrs. LOWEY. Thank you.
Thank you, Mr. Chairman.
Mr. PORTER. Thank you, Mrs. Lowey.
The subcommittee should be informed that we are operating under the 10-minute rule, and we will have a second round.
Mr. Hoyer.
Mr. HOYER. Thank you very much.
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Mr. Apfel, welcome to the Committee.
Mr. APFEL. Thank you.
OFFICIAL TIME EXPENSES
Mr. HOYER. Mr. Apfel, as you know, official time has been an issue. I would like you to speak to that. I notice that official time expenses are scheduled to go down by $2.4 million. We may or may not have a discussion about that this year, I do not know, but I would like to have something on the record.
In addition, you mentioned the treatment of partnership dollars. One of the questions that might be raised is; are we shifting the 18 percent reduction in official time to partnership time? Would you comment on that?
Mr. APFEL. Official time and partnership time. In 1996, the Social Security Administration, the expenses were $14.7 million for official time. In 1997, that was down to $12.4 million. So there was a sizable reduction that took place. You are correct——
Mr. HOYER. Excuse me, you are right. I was referring to fiscal year 1997.
Mr. APFEL. Correcting the right dates. So therefore, there has been a reduction in the amount of official time. I have made a decision to report separately partnership time, but that is not starting—it actually started this January 1. So this reduction has nothing to do with a shell game of sorts of shifting dollars from one thing to the other. We have had official time for many, many years in government, needless to say. What the President established with partnership was an attempt to try to change the culture, to try to change the dynamic, and to have labor and management working together to try to improve customer service. I think those are very important activities that are not official time to me.
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What I decided to do was to have partnership time be counted separately and provided to the committee; to have official time, consistent with the committee, reported as well. So both will be there. But I think there are two very different functions. Partnership is aimed at changing the cultural within organizations. I believe it has a tremendous potential to do that. But the reductions that you saw from '96 to '97 was—it is not as if the partnership time took off during that time. But it is possible that over time, greater reliance on partnership could reduce overall official time if we create the right climate and the right cultural changes within the organization. We will have to be looking at in the years ahead to determine how partnership changes the whole labor-management relationship, as well as customer service.
FULL-TIME EQUIVALENT (FTE) PROJECTIONS
Mr. HOYER. The Chairman referred to the time it took to get a hearing. What is your projected FTE for fiscal year 1999?
Mr. APFEL. My projected FTE for fiscal year 1999 is 63,900.
[CLERK'S NOTE.—Later changed to ''about 63,900.'']
Mr. HOYER. How does that relate to last year?
Mr. APFEL. 65,700.
[CLERK'S NOTE.—Later changed to ''about 65,700''.]
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We are coming down as an organization. Actually if we look back to the 1996 levels, between the State disability systems, DDSs and Social Security proper, our work years, we are about 80,000. We expect in 1999 to also be at about 80,000.
We spiked up in 1997 and 1998 for very good reasons. One of them was welfare reform. If you remember, the DA&A caseload, the SSI kids caseload, immigration caseload led to a need for expanded staff. We are now seeing most of that workload coming through the system. DA&A is done.
Immigration is done. We are left with some of the childhood cases. By next year they will be in OHA, and be out of the State disability determination system.
In addition, we are seeing the impact of the automation improvements. The automation will be fully implemented by June of next year. That leads to savings in terms of work years as well as actually the steps in the paperless processing, which saves work years.
So we are coming down as an organization. As I pointed out to Mr. Porter, this is a tight budget. We are coming down as an organization, but we still believe that even within that, and holding the Office of Hearing Appeals basically to its current levels, we can work down those workloads in the OHA.
Mr. HOYER. You anticipated my question, which was to be, do you believe there are sufficient personnel resources to accomplish the objectives of your responsibility?
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Mr. APFEL. I believe there are. I believe that we can accomplish the 1998 to the 1999 levels of dollars and still meet our objectives; yes, I do.
Mr. HOYER. Thank you. I have no further questions, Mr. Chairman.
Mr. PORTER. Thank you, Mr. Hoyer.
Mr. Obey.
SSA'S FIVE-YEAR BUDGET
Mr. OBEY. Thank you, Mr. Chairman. I don't want to take much time because I know others were here before I was. I would just simply ask a couple of quick questions about your budget.
Do you know what a politician is? A politician is generally somebody who makes a stupid decision and then blames the pointy-headed bureaucrats for not being able to carry it out months and years down the line. I am concerned about your 5-year budget, the budget that was included in that wondrous budget agreement that was passed last year. As I understand it, that budget recommends a 23 percent reduction below current services baseline over the next 5 years. Is that about right?
Mr. APFEL. The targets that were included in the President's budget did level-fund many activities. Those decisions are made on a year-by-year basis. But the projection that was included in the budget, even though every year we redecide this issue, as you know, with the Appropriations Committee and the President's request, would be basically a freeze for the 5-year period.
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Mr. OBEY. Which results over time because of inflation, according to the estimates that were in the budget last year, in about a 23 percent reduction in current services?
Mr. APFEL. I believe that number is correct, below current services.
Mr. OBEY. Right. That comes at a time when your workload projections and numbers of beneficiaries are going to be increasing. In the context of public debate on the future of Social Security, I just want the record to show I have substantial doubt about the wisdom of simultaneously knocking the legs out from your agency just before the baby boom bulge begins to hit the rolls. If your agency is not able to offset those cuts with much more efficient ways of doing business that have yet to be designed, what impact would those budget numbers have on your agency's operations by 2002, especially with regard to your ability to meet your strategic plan goals and in terms of service to the public?
Mr. APFEL. First, Mr. Obey, I wanted to reiterate that these are decisions that are made on an annual basis. Every year we will be in reassessing these numbers. The outyear projections, as we know, are outyear projections.
Mr. OBEY. I am assuming that we lock into the decisions that were made in the 5-year budget.
Mr. APFEL. If the Social Security Administration were held to a freeze level for the next 5 years, staffing would go down from about 80,000 to about—that is, within Social Security as well as the State disability system—by about 15,000, down to about 65,000. I have not developed efficiency mechanisms to date that would come near meeting those reductions in staff. Therefore, if that took place, there would be a significant impact on performance.
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But as I said, the annual decisions as to what the levels of support should be for the Social Security Administration are made on an annual basis. I submit my budget. The President submits the budget. The Congress then acts. If I believe that there will be a significant deterioration in workload and a disservice to the American public, I will be before this committee to argue for different levels.
COMMISSIONER'S BUDGET FOR SSA
Mr. OBEY. It is my opinion if we stick to those 5-year levels, you are going to have the same politicians who voted for that budget deal 5 years ago pounding on the Social Security Administration, crying all the way to the nearest press release, blaming your agency for ineptitude and mismanagement because they are not able to meet public demands for services which they themselves squeezed by their support of that deal.
Just two other questions. By law, as you have probably talked about already, the Commissioner is supposed to support a bypass budget directly to the Congress. Your 1999 bypass budget is $259 million above the President's request. What is the impact of that difference between your budget and the President's budget?
Mr. APFEL. My budget request was $257 million, $257 or $259, higher than the levels that the President submitted. About $160 million of the difference, Mr. Obey, was due to some later-than-anticipated reductions in disability caseload. In other words, when I submitted my budget, we expected new disability workload to be coming in the door at a higher level than the actual that was predicted later in the year. So that is about $160 million of the difference.
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About $50 million of it was due to added automation investments that I had initially proposed to move—this committee, and we thank you enormously, provided the full amount of money for automation investments over the 5-year window. I had contemplated whether to start up a new round of investments so that we were ready to plan in the future. That was one that could be easily shelved for a future date.
An additional $50 million was for overtime. The FTE levels that were included in the President's budget request are consistent with my FTE levels, but I had initially proposed an extra $50 million for overtime to try to work down more of the backlogs in disability case processing and in field operations. The main difference in terms of once you take into account the disability changes and the $50 million in automation, was that $50 million in overtime.
Mr. OBEY. I have got one other question which I will simply submit for the record and ask you to respond to on your own, without benefit of OMB interference.
Mr. HOYER. Would you yield on the last question?
Mr. OBEY. Sure.
ADEQUACY OF BUDGET REQUEST
Mr. HOYER. My question was did you have sufficient resources. I perhaps did not go into it deeply enough. Am I understanding your perception is that you will not be able to get the backlog down as quickly as you deem appropriate because of the lack of that $50 million, which will therefore either negate additional personnel, or, as I understand it, overtime payments so that people can work an hour or two extra a day to get that backlog down?
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Mr. APFEL. The $50 million in overtime was both for—in the hearings area, but a large proportion was in the field offices to be able to handle our ongoing workloads. A piece of that, I would say, would probably not be in the areas of the hearings and appeals backlog; only part of it would be. But it was basically to handle overall workloads within the agency.
Mr. HOYER. Mr. Apfel, I am obviously not trying to get you to criticize the Administration. We are dealing in a world of trade-offs, which is what Mr. Obey said. We cut resources, you cannot do the job, somebody is going to take the blame. My suggestion to every administrator with whom I talk is tell it like it is. You have x number of dollars, you can do y number of cases or workloads.
I guess what we are asking is that Mr. Porter said that he thought the level of backlog was unacceptable and the time to handle cases was unacceptable. I agree with him, but that is obviously a function of the numbers of people and how long they work. Again, I ask you, are we going to have an adverse impact on the level of resources allotted in the budget on the ability in this case specifically dealing with backlogs, but any other services provided by your agency to the public?
Mr. APFEL. It is my belief that the President's budget request will—we can live with the performance commitments made in the President's budget. I think those are good, strategic commitments. Certainly my initial request for an added $50 million would have helped to improve reducing backlogs further and providing added activities in the field structure to be able to provide better service delivery. But we can still meet the performance commitments that were made without that $50 million. I wanted a little extra to be able to do a little bit more.
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Mr. HOYER. Thank you, Mr. Obey, and thank you, Mr. Chairman.
Mr. OBEY. I would simply say in summing up, I think the message is pretty clear that if we want an improvement in the ability to provide timely service to people, we will need to provide resources. Certainly my judgment on the basis of common sense and your responses that we are not likely to get adequate resources if we stick to the 5-year decision framework that was laid out in the budget last year, one of the many instances where a temporary generic good news will be balanced off by specific bad news when people come to understand what will happen when we translate the generalized numbers into specific program decisions. There are going to be a hell of a lot of people in this country who are expecting lots of stuff the government isn't going to be able to deliver that are going to be, I think, mad as hell about it when they see the erosion in quality of services over the next 5 years.
FUNDING FROM LEGISLATIVE PROPOSALS
Mr. APFEL. Mr. Obey, if I could make one other point. The administration's budget also includes a request for $69 million in added money; $50 million of it is part of——
Mr. OBEY. That is the other question I wanted to submit to you for the record.
[The information follows:]
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IMPACT OF NOT ENACTING PROPOSED LEGISLATION
SSA's budget includes $69 million for legislative proposals which would authorize SSA to impose a monetary assessment on certain claimant representatives ($19 million) and would adjust the discretionary spending cap for funds for SSA to conduct additional redeterminations of the non-disability factors of SSI eligibility ($50 million).
A key element in SSA's strategy to make the SSI program the best it can be, and to deal with the General Accounting Office's (GAO) criticism of the SSI program, is the $50 million in additional funding to enable SSA to conduct an additional 268,000 SSI non-disability redeterminations. Without additional funds to finance the redetermination proposal, more SSI recipients will continue to be under/over paid; and SSA would not realize $97 million in program savings for FY 1999 and $216 million through FY 2003.
SSA's proposal to charge claimant representatives for the work it does in withholding money from past due benefits and issuing payments is in keeping with the Administration's policy to impose a fee for such special services.
From a practical perspective, failure to approve these proposals would also result in serious operation problems:
With little replacement of losses and minimal overtime already budgeted for FY 1999, SSA is working on the edge within a very narrow operating margin.
With $69 million less to work with, any flexibility would be all but eliminated and service to the public would suffer.
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Taken together, the $69 million will finance about 1,500 full-time equivalents (FTEs) in FY 1999.
FTEs currently budgeted for FY 1999 decline by about 1,800 compared to FY 1998. With attrition at about 3 percent (yielding an annual reduction of about 2,000 FTEs), limited hiring flexibility and minimal overtime budgeted should help deal with spot shortages, so this FTE reduction can be managed.
With $69 million less to work with, FTEs would need to be cut even more and overtime further reduced. Performance would clearly deteriorate, by some amount not presently calculable, especially in our inner city field offices where workloads are highest and turnover is greatest. These are the offices which traditionally service our neediest constituents.
Mr. APFEL. I just wanted to be able to say that that is primarily not this committee's immediate jurisdiction, I don't think, but any help you can provide on that would be very much appreciated, because to meet our performance targets, we need that $69 million. We need to be able to not only for performance, we need those resources to support our overall staff levels that we have.
Mr. OBEY. The reason I asked you to respond to that question without benefit of OMB participation is so that people understand when they read the response that this is based on the straight skinny from your agency without any political involvement from any White House operation.
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Mr. APFEL. Yes, sir.
Mr. OBEY. I thank you.
Mr. PORTER. Thank you, Mr. Obey.
Ms. DeLauro.
INVESTING SOCIAL SECURITY IN STOCKS
Ms. DELAURO. Thank you, Mr. Chairman. I want to thank you, and welcome.
This morning's Los Angeles Times had a front page story saying that the GAO Calls Stocks a Risky Fix for Social Security. Let me just quote a couple of things from the article. It talks about potential investment scenarios. It says, the potential returns are promising, but the risk is real, the GAO said. Quote, riding out a stock market downturn could be difficult for the Trust Fund as it faces growing numbers of retirees. The more the Trust Fund is counting on stock sales to raise cash, the greater its vulnerability in the event of a general market downturn. The GAO offered a historical reminder to stock market enthusiasts. Stocks fluctuate, a reality some may overlook in the current bull market. Quote, there is no guarantee that investing in the stock market, even over two or three decades, would match the market's long-run average return, the GAO said.
I don't know if you have seen the report. This also makes a comment, it is an admonition actually is the way they describe this, as many Members of the Congress are expressing enthusiasm about proposals to allow workers to funnel some of their Social Security payroll taxes into personal investments to help bolster their retirement income. Again, I take it you haven't seen the report. I have just got the article. I guess all of us are going to try to get ahold of it to take a look at it.
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My question to you is just to have you comment on the sketchy information, albeit from a news article, but you all have had to have talks about this direction we appear to be taking in privatizing Social Security.
Mr. APFEL. There are a number of different options that are before the American public as to how to move the Social Security system to the 21st century. In terms of investing in equities, there are two different ways that that can be done as well, if that is the direction that people choose to move. One would be to invest some of the Social Security Trust Fund in equities. The other would be to have individuals invest something on top of Social Security or as part of Social Security individual accounts and possibly invest those in equities.
There are trade-offs to both options, needless to say. If we look at investing—as you know, Ms. DeLauro, Social Security invests solely in government securities currently. It is a relatively low rate of return from government securities. Some would argue that changing the portfolio to invest some in markets could potentially increase the amount of returns that Social Security would receive over time, thereby reducing the overall size of the changes that would have to be made to Social Security. That could potentially provide a plus. On the downside are whole issues of corporate governance and of the United States Government investing in the corporate stock market.
In terms of individual accounts, again there is the potential for higher rates of return through the stock markets, but with added returns or potential returns comes added risk, whether it be when an individual moves to retire, whether it coincides with a downturn in the market, what have you, or whether an individual makes poor investment choices over their lifetime. These are all the issues that we have to weigh in the course of this next year as we move toward this Social Security reform endeavor.
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What the President says we need to have is to talk about all of these options openly, directly; talk about the pros and the cons to the various options that are out there.
Perhaps one of the thorniest issues that we will be confronting is the one that you have discussed, is investing in markets and whether or not to create individual accounts. The administration has not ruled out a form of individual accounts. What the President did say is that we need to have a benefit in Social Security that we can count on over time, even if the individual outlives their savings or their pensions, a benefit that is there for that 80-, 90-year-old widow, no matter how long she lives. But whether as part of this debate there would be changes in investments in the Social Security Trust Fund reserves or the creation of individual accounts are all things that we believe this year we need to have discussions about.
Ms. DELAURO. Just a couple of things, because the article does talk about—I understand that there are individual accounts, but it appears to talk about actually moving it from Treasury investment into the market, and it talks about the riskiness of that effort. As I say, I want to get ahold of this and take a look at it, as I am sure you do.
You are right when you talk about this has to be something people count on. Fundamentally, that is something we are trying to deal with here are people's lives, whether it is the function currently there now or the baby boomers coming through where there is a potential risk.
What worries me—and I am asking the agency, your agency and you, you know this system, this is being administered at some point, and I am not asking you here today what is going to be in the best long-term interest for the people in this country. Not a feel-good, quick-fix, cash-immediately system that undermines the fundamental principles upon which Social Security was based and what it means for the future.
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There is a lot of money to be made in some of these efforts by folks who do the investing, and that is terrific; I don't begrudge them any money. But there are a lot of little folks out there whose whole life they view as tied up with this very fundamental system which has been one of the sole efforts to raise seniors out of poverty in this country.
I am asking you as an agency and your folks to take the hardest look at the level of discussion, about where the discussion is going, where it is, and talk with us about what your views are and to what is in the long-term best interest of this effort, and that this not become the realm of the political. And as I say, the quick-fix effort on this thing—in my view, it needs a lot of time, a lot of study, and not a rush to judgment as to whether or not we begin to privatize, whether the individuals do it or whether an agency does it.
REVIEW OF DISABLED CHILDREN'S BENEFITS
If I can move on. After the implementation of the welfare reform law, there was an outcry from many parents of disabled children. I know you are reexamining the 45,000 cases. Can you tell us how many people had their benefits reinstated and how you are trying to correct the problems that led to some of these things?
Mr. APFEL. When I was confirmed, the first priority that I laid out was reexamining the SSI kids' program. We were starting to lose some of the legitimacy, the broad-based legitimacy of the program that we needed to restore. After a very careful examination, I reopened appeal rights for every individual who had been terminated from the program, and targeted where we saw the potential—potentially the largest areas of potential question marks between the area of mental retardation and specifically reopened those cases.
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We have just finished, within the last month, retraining of the State disability determination staff, with new information. Right now we are starting the process of reviewing those cases. I can get you, for the record, the actual number of individuals who have applied for—who have appealed their benefits. They no longer had appeal rights. We gave them a new appeal round. They will be reassessed first this year in the State disability system and then, if individuals want, on to the hearings process next year.
It is premature to know entirely what the changes will mean, but I can point out that when the legislation was enacted, we originally assumed that after appeals, about 135,000 kids would be removed from the rolls because of the eligibility changes. Our projections are still around 100,000, so there will be a significant number. That is partly because of the number of people who originally came through and were allowed, as well as some of these new activities. So to put it in context, there are about a million children on the SSI's kids; roll, so when the changes are done, it will be about a 10 percent reduction in the number of children receiving SSI benefits.
Ms. DELAURO. They are still under review; is that correct?
Mr. APFEL. Those are under review. Within the last month, we started to redo the cases. I will provide for the record if we have even initial cases of the numbers that are coming on based on State action, but it is very early in the redetermination process.
[The information follows:]
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REVIEW OF SSI CHILDHOOD CLAIMS
Of the approximately one million children receiving SSI benefits, about 288,000 were subject to eligibility redetermination under the provisions of the welfare reform law. Approximately 272,000 have received decisions and another 8,800 children were terminated for non-medical reasons. As of April 25, 1998, there were 129,000 cessations. SSA estimates that once all cases are reviewed, the number of children impacted will decline to approximately 100,000.
We are reexamining about 59,000 cases for children who had their SSI disability benefits denied or ceased under stricter eligibility provisions. It is too early in the review process to provide outcomes on any of these cases.
In addition, families of children who lost benefits and who did not appeal that decision were given a second opportunity to do so. As of April 18, 1998, 17,574 (27.8 percent) of the 63,278 renoticed families of children who were ceased have filed appeals for reconsideration of the decisions.
Although we will keep track of the number of cases coming back on the disability rolls based on State Disability Determination Services action, it is too early in the review process to provide outcomes on cases reviewed.
Ms. DELAURO. Thank you very much. Thank you, Mr. Chairman.
USING THE BUDGET SURPLUS TO PROTECT SOCIAL SECURITY
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Mr. PORTER. Thank you, Ms. DeLauro.
Since the issue was raised, we are going to have a surplus in our budget this year. No one knows exactly how much.
What specifically is the President proposing to do with that surplus to protect Social Security, and how does he propose to do it?
Mr. APFEL. What the President said is that we should not drain those surpluses through tax cuts or through spending increases until we reform the Social Security system. What the President did not say is we should use every dollar of the surpluses to give to the Social Security Trust Fund or any other option. What he said was let's not drain away the surpluses until we fix the Social Security system. I understand there have been a few proposals that have been introduced to actually establish some form of special account to hold those surpluses until the Social Security issue is resolved.
[CLERK'S NOTE.—''The President's proposal was not to give the surpluses to the Social Security System'' was later changed to, ''the Presidents proposal was not necessarily to give the surpluses to the Social Security system.'']
The Ways and Means Committee has such a proposal. It is out there that we would be willing to discuss with the Congress that the President's proposal was not to give the surpluses to the Social Security system; it was to reserve those surpluses, pending Social Security reform. The effect of that would be to write down the debt over the short term, until that Social Security reform initiative is enacted next year.
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Now, as you pointed out, there are now some early talks of surpluses accruing this year. We had anticipated earlier this year that the surpluses were going to be starting to come next year and that Social Security reform would even be done before the first surplus would accrue, because the surpluses would not be known until October of 1999, and our expectation is Social Security to be reformed next year. There are reports of surpluses generating earlier, and we would be willing to discuss options with the Congress if there was a desire to create some form of a special account of some kind.
Mr. PORTER. Don't we have a special account called the Social Security reserve? What if we just put the money in there.
Mr. APFEL. Well, if an action was taken to designate that the amount of the surplus, the unified budget surplus would be provided to the Social Security Trust Fund, that would have the effect of increasing the amount of money of the Social Security Trust Funds over and above what we now have in the trust funds, and that would take a law change to do that. That is one of the options that is possible——
Mr. PORTER. Then by law we would immediately loan the money to ourselves and spend it, which is why there is nothing in the Social Security Trust Fund but a lot of IOUs that have to be redeemed at some point in time if we are going to pay benefits from it correct?
Mr. APFEL. Well, the effect of adding, as a hypothetical, $100 billion in surpluses, would be to move the date of insolvency of Social Security by about a year. But it is true that during the 1980s, and particularly in the 1980s, the surplus that started to accrue based on the 1983 reform was a very small component, given the massive budget deficits that we had during that time. It was clear these dollars were used for other activities. I would also point out, though, those dollars are invested in the safest investment known, which is government securities.
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Mr. PORTER. Well, Mr. Apfel.
Mr. APFEL. I think it is the most important reason why it makes no sense to drain the surpluses away now, for either tax cuts or for spending increases, until we address this centrally important issue for this country.
LONG-TERM SOLVENCY OF SOCIAL SECURITY
Mr. PORTER. Well, my point is that we have special accounts, we have said for years we are going to protect Social Security, we are supposed to be building a huge $3 trillion reserve in terms of 1990 dollars so we can have the funds on hand to provide the baby boomers with the same good benefits that have been received by seniors now, and yet everybody knows that what the account contains is a lot of IOUs that the government can only, when the big drain comes down, when baby boomers start to retire and the drawdown begins to occur, we would have to go back to the market, borrow huge amounts of money in relatively short times, driving up the cost of money greatly. And I don't think anybody believes that the trust fund concept has worked to protect Social Security one bit.
We really have three options, unless we do something now to truly protect Social Security, and one is to engage in this massive borrowing I mentioned; the other is to cut benefits; and the third is to raise taxes. And nobody wants to do any of the three things, and they are all really politically and economically impossible.
So we are in the situation now we face the Social Security system that is facing serious problems when the baby boomers begin to retire, and at least we are beginning to talk about it, but nothing has been done that meets that challenge or puts us in a position to preserve the system as we know it today, that I know of.
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And while the President stated something that ought to have been stated a long time ago, we ought to protect Social Security, I frankly don't know how you do that within the context of this government, without putting the money out of the reach of either the administration or the Congress or both. Because you can say we ought to not do something, and this Congress might not do it, but the next Congress might do it or the next Administration might do it. There is really no way to protect surpluses from the kind of deficit spending we have seen over the last years.
The Social Security Trust Fund has simply been spent to cover other expenses, and we have left IOUs, and this is the reason we can talk about it all we want, but unless we are going to change the nature of the system, we are always going to be at the risk of irresponsible fiscal policy that we have seen so much of in the last 30 years.
And I would add something, and let me agree with Ms. DeLauro: Don't put that trust fund in the stock market. That is the dumbest idea that has been advanced to date, I think, to protect Social Security. She is exactly right. If people are considering doing that, please, please, please, don't do it; it isn't the way it ought to be done at all.
The only true way to protect Social Security is to create the kind of system we would have created had we had the resources to do so in the middle of the Great Depression, that is a fully-vested, fully-funded system, owned by the American workers, that they have in their hands; not in the hands of the government and Washington, either Administrations or Congresses. And I believe very, very strongly that we shouldn't jump into anything, as has been said here. I believe very strongly this country is in the position right now to create the kind of system, if we have the will to do so, and provide people, workers in America, people who in many cases have never been able to save a dime during their working lifetimes, with the kind of benefits that will make poverty in senior years absolutely impossible in the future; a minimum return of three times the amount that has been received by Social Security today, with people understanding that it is theirs and nobody can mess with it, and they have the investments that allow them to have true security in their senior years. But don't put it in the Trust Fund. That is the kind of halfway measure that makes absolutely no sense, and people keep talking about it, and that would be absolutely crazy.
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I think the idea is to simply say we now have the resources, we have a country that is strong enough economically to create the kind of system we would have created in 1935. We can do it, we can make it strong, we can make it owned by the workers, and we can get the misuse of Social Security funds out of the hands of government so it can never happen again and people will be truly protected from that kind of fiscal irresponsibility that has put us in the position where the baby boomers really, truly are at risk and their benefits are truly at risk unless we do something really smart to protect the trust fund and the Social Security system in the future. That is my sermon. Do you want to respond to that?
NATIONAL DEBATE ON SOCIAL SECURITY
Mr. APFEL. Just briefly, Mr. Chairman. You have certainly joined the debate. This is the debate America is going to be having in the course of the next year and there are a lot of different viewpoints on this. I believe we could not have had this debate 2 and 3 years ago when we were running $100 and $200 and $300 billion deficits.
Now in terms of the unified budget, we have some modest operating surpluses projected for many, many years into the future. That does increase the number of options that are available. All the way in the political spectrum, it increases options that are available for resolving this. So the time is now. I think we would be doing the American public an enormous disservice if we didn't have the major national debate this year, and then, move on next year to ensure people's retirement security for the long run.
And, clearly, there are a lot of different viewpoints that were even expressed here today. What the President hopes is, by the end of a year-long discussion with the American people, not just with think tanks in Washington but with the American public, it will come in a bipartisan and a reasoned way to economic security for future generations.
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Mr. PORTER. If I can respond to that, you are exactly right. We couldn't have had this debate. I put in legislation in 1989 that would have protected the Social Security reserve by putting it back in the hands of the American workers who earned it, and nobody wanted to talk about Social Security at all. You would whisper the word Social Security in a room full of politicians and you would find yourself alone. Today we are talking about it, that is progress; but 9 years have passed and you can tell me, if you will, how many IOUs of the U.S. Government are in the reserve today; that is, what does the reserve account amount to?
Mr. APFEL. There are about $700 billion that have now accrued to the Social Security trust funds.
Mr. PORTER. How much is it accruing per year at the current rate? In other words, how much will be added in the next year?
Mr. APFEL. About $100 billion a year. Half of that is in terms of added payroll taxes over expenses and half in terms of interest.
Mr. PORTER. What will be the maximum rate before we reach the drawdown, the add per year? It is something about 200 billion, if my memory serves me correct. That is the maximum.
Mr. APFEL. Yes; and peak at about $3 trillion.
As of 2012, that will be the first year, under current projections, where receipts coming into the Social Security Trust Fund from payroll taxes, not from interest, will be less than the amount of expenses; then by 2029, that is the date that basically all the reserves will be gone and the system will bring in about 75 cents in terms of revenues for $1 in benefit obligations.
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Mr. PORTER. So the problem is evident to everyone.
Mr. APFEL. The problem is real. I disagree somewhat with the characterization that the money is not real. I think the commitments to Social Security have been iron clad in the past. If we go back to 1983 when the Social Security Trust Fund was in very major jeopardy, I know you were aware then and involved very much in those endeavors, but that tended to focus the American public's mind on the fact we had to take action.
The problem we have now is we have a problem that is 20 and 30 years away. In 1983, we had a problem that was acute, it was immediate; it was what was going to happen to the July of 1983 checks. The public discussions that took place in 1981 and 1982 and early 1983 set the stage for some open bipartisan action by the Congress and the executive branch to ensure that Social Security would move forward.
We don't have that same circumstance today. We don't have the 1983 insolvency looming. This is a long-term issue; it is not a short-term crisis. We can prevent a crisis from ever occurring if we take action in the short term. So what we have to be able to do is still have the public discussion and create the sense of urgency with the American public, because it would be fundamentally wrong if we were sitting here 10 years from now and not taking action on this front.
Mr. PORTER. Since the beginning of the drawdown occurs 15 years from now, it is obviously not such a long-term problem.
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Mr. Hoyer.
SOCIAL SECURITY RATES OF RETURN
Mr. HOYER. Mr. Chairman, I was starting to leave, but I was interested in your observations of this conversation.
Trust fund is rhetorical; it is never a reality. What you set up to be a reality is a transfer payment. And, in my opinion, Senator Moynihan was correct. We have overbilled middle-income workers very badly. If there ought to be a tax decrease, it ought to be a tax decrease in the FICA tax. That is the tax, Mr. Chairman, very frankly, nobody on your side talks about when they want to reduce taxes, but it is the tax that is, in my opinion, the most inequitable tax we have in the country, in that it is a tax on gross receipts of income of lower- and middle-income workers, and all us rich guys get exempt from it halfway through the year.
And we do not have any surplus. There is no surplus. We talk about a surplus because we have the Social Security receipts, but in terms of what we are buying and what we are getting, we do not have a surplus. We are buying more money than we have, if in fact 1983 was real, and I understand what you are saying, and I agree with you, Mr. Apfel, that commitment on behalf of the government is real.
But I have three daughters, 27, 29 and 34. Now the 34-year-old is probably a level of income that is pretty equitable. She is a college graduate, she is doing pretty well, she has got a good job. The 27- and 29-year-olds are getting really socked, so that their grandmother, who is 83 years of age, can get benefits far beyond what she paid for. And her generation, and the generation that is succeeding her up until relatively recently, got a better deal than my kids are going to get, a much better deal. And in order to do that——
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Mr. PORTER. Not necessarily. We can change it.
Mr. HOYER. We can change it, but under present circumstances, my mother-in-law, who is 83 years of age, got her full payout in about 3 or 4 years, of what she put in. My kids will never get a full payout.
Mr. APFEL. Well, I don't think I agree with the assessment they wouldn't get a full payout.
Mr. HOYER. If they live, how long will it take them?
Mr. APFEL. Rates have certainly declined, and certainly will as well.
Mr. HOYER. They will be 67 years of age when they get Social Security benefits. Well, they may be older if we change that. But let's say right now they are going to be 67; right?
Mr. APFEL. Right.
Mr. HOYER. How long will it take to recoup the money they have paid in?
Mr. APFEL. I would have to get you that exact number.
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Mr. HOYER. Twenty-five, 30 years?
Mr. APFEL. How old is she?
Mr. HOYER. The youngest is 27.
Mr. APFEL. The rates of return have declined, certainly, within Social Security.
[The information follows:]
PAYBACK PERIOD
As an illustration, for an average worker retiring in 2035 at age 67 (age 30 today), it would take 12 years for this worker to recover in retirement benefits, the amount of his/her OASI taxes, plus interest. If both employer and employee OASI taxes are considered, the recovery period would be 30 years.
These calculations were done on a profile which assumes constant average earnings throughout life. Soon the Social Security Actuaries will have a model allowing for calculations based on more realistic earnings histories which would begin with entry level work with subsequent increasing salaries.
Note: Payback times are based on intermediate assumptions in the 1998 OASDI Trustees Report.
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Mr. HOYER. Unlike those we talked about before, you were going to get it back in 3 or 4 or 5 years max, and the wealthier you were, the longer it took you to get it back, because we make it fair by inverting the payout. We make it more aggressive.
Mr. APFEL. I think it is important, rates of return is an important issue and we need to confront that this year during the debate. But it is not the only issue in Social Security. If we look at the importance of the survivors program and the disability program, nearly a third of benefits are paid to survivors and disability payments.
My wife was a young girl when her father died, leaving her mother and four kids, alone. That Social Security check, it is an important part of Social Security, as well as the progressive benefit structure which provides higher rates of return for lower-income workers to provide that foundation of support.
Mr. HOYER. We agree. What we have done, from the 1935 enactment, we expanded benefits greatly. In 1972, [Wilbur] Mills and President Nixon made a gargantuan mistake that we had $1 million and we could really go to town, and they were wrong and changed it 5 years later.
And what I am saying is, Senator Moynihan said, look, in effect, you are overcharging this generation to subsidize previous generations who were not taxed nearly as hard as they were. What is going to happen is subsequent generations will depend upon what we do, as you pointed out, in terms of policy, and we are obviously going to have to do something. None of those three alternatives are very popular.
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I voted for the Balanced Budget Amendment Charlie Stenholm moved for in 1993, and it had a cost-of-living adjustment. There were not a whole lot of us who voted for that the first time. But my perspective was then, as now, we have to be real. And, yes, I think those securities are going to absolutely be honored. If they are not, the country is going to be in the dumpster, so it will not matter. And then none of it will be very good when they put in a stock market and government securities.
But the fact of the matter is that I am of the opinion that workers earning between $20,000 and $40,000 dollars are really getting hit hard because of the gross tax on their income. The wealthier Americans avoid that. And forget about capital gains and all the other stuff, but just in terms of wages earned. And I think Senator Moynihan has touched on that a number of times.
And when you talk about a surplus, I think the President is absolutely right. I am supporting the President in his objective. I think that is exactly the way to go, because it does not have a positive effect. But we are talking as to what the Congress does and what we thought we were doing in 1983, but we do not have a surplus, except as you consider, vis-a-vis the way we account it, that we do have.
NEED FOR ADMINISTRATIVE BUDGET
Mr. APFEL. Basically the budget is a cash flow budget, and in cash flow terms, there is a surplus, but there are long-term obligations for sure. I would hope the committee, as it engages in this debate, also remembers my administrative budget, which is really important, too.
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Mr. HOYER. This is a nice theory. You want to know how much money you are getting next year right? You know what? You are like every other American. Thank you, Mr. Chairman.
INTERGENERATIONAL EQUITY
Mr. PORTER. I was listening with interest, Mr. Hoyer, as you were talking about recoupment. My grandfather recouped instantly, because he went broke in the middle of the depression, his business went bankrupt, he had nothing, and never paid a cent into Social Security but went on Social Security because that is the only thing that saved him, so he never had any investment in it.
Mr. HOYER. That points out it really was a pay-as-you-go program where current workers supported retirees.
Mr. PORTER. And the difficulty——
Mr. HOYER. Which was fine when we had fewer retirees and more workers.
Mr. PORTER. Right. I don't want to reduce the FICA tax. The FICA tax, if it is there for people, is a forced-saving system that requires them during their working years to put money aside for their retirement years. The concept of it is a very good one. It is the execution of it that we have had some serious problems with. This has been a wonderful program, up to this point. It has largely eliminated senior poverty. It is an icon of this——
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Mr. HOYER. We are not going to argue about that. We agree.
Mr. PORTER. It is an icon of this entire country. And yet you have young people in this country who don't believe they will ever get a penny out of Social Security, don't believe in it at all. And when you have something that is so important and central to your country and its policy, that is not believed in by a large segment of your population, you have problems. And we have problems today, and we are going to have to address this problem and gain back the confidence of young people that they are going to have a Social Security system that is just as good, or I would say substantially better, than the one we have had in the past. If we don't do that, we will go straight downhill. We just must do this. To my way of thinking, it is very, very significant we turned the corner on the discussion and we are having it.
Mr. HOYER. Mr. Chairman, will you yield on that. My point in FICA is that in the 1980s, we all talked about reducing peoples taxes, we kept the Social Security fund in 1983 whole. There was a crisis, we overfunded it, and we used the money. And we used the money notwithstanding the fact we were cutting other wealthier people's taxes. So middle income—and when I say that, $45, $50,000 and less—their income was getting taxed more heavily, so that richer people could cut their taxes, and still bought defense and still bought domestic.
In the Congress, we wanted to buy domestic. The Administration wanted to buy defense. We said, all right, we will buy both. I supported most of the spending on defense and the domestic side, so I am not criticizing the purchases. I am criticizing not paying for it, and we did pay for it, but we paid for it by overtaxing, and I want you to understand what we are saying. I understand you do not want FICA reduced, but the fact is what we did is we subsidized tax cuts for wealthier people by overcharging the pay-as-you-go plan. That is what it was. That is why your dad could take you out immediately.
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Mr. PORTER. Great grandfather; yes.
TAX PAYER-TO-RETIREE RATIO
Mr. HOYER. Yes; could take you out immediately, because workers of that day were paying the freight. There happened to be, what, about 15 of them to every retiree at that point in time.
Mr. APFEL. That was about 30 years ago.
[CLERK'S NOTE.—Later changed to ''50''.]
Mr. HOYER. And now there are what, 3 1/2?
Mr. APFEL. About 3.
NATIONAL DEBATE OVER THE FUTURE OF SOCIAL SECURITY
Mr. HOYER. So now we have fewer workers supporting us so the freight has to be higher. But if your theory was correct, if the theory was originally a pay-as-you-go program, we overfunded it on the theory we were going to put it into some annuity. That is what everybody thought. You are saying we did put it into an annuity, into government securities, and of course that is correct. But the fact is, as the Chairman points out, the American people are going to have to pay off that debt, and they are the same people who are going to be paying the FICA tax in 2005 or 2010 or 2015.
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Mr. PORTER. If the gentleman will yield, it seems to me the lesson in all this is you can't trust the government with a surplus; it is going to be spent, and it is not going to be saved and protected. It won't happen. That is my point. And if you don't get it out of the hands of the government and into the hands of the workers, it is going to be gone, as it is right now; it is gone, we spent it. There is no reserve at all. There is a bunch of IOUs and a promise they will be redeemed by more borrowing in the future.
Mr. HOYER. Where does that take us, Mr. Chairman?
Mr. PORTER. To a fully-funded, fully-vested Social Security system that is owned by the American workers and can't be taken away by a government who wants to spend the money for something else, which is what the government has done. There is no doubt about it. You said it, and I agree with you completely. We saw that big bunch of money there and spent it, and robbed people perhaps of their future. And now we are trying to backtrack and save that future by some means. And as I suggest, all of the ones that have traditionally been used—more borrowing, raising taxes and cutting benefits—those aren't options, they really are not options. If we are going to sit here and do nothing about Social Security and wait for the baby boomers to start retiring, we are going to have a disaster on our hands for our entire economy that will simply be unacceptable to anyone.
Mr. APFEL. I would point out that 6 months ago—that over the last 6 months, the debate really has changed, though; that 6 months ago, when the first glimmers of surpluses came along, there were a number of proposals out there to immediately use them up. I think holding off on utilizing those surpluses was an absolutely appropriate activity until we can determine what to do about the Social Security system. The debate has changed in a very fundamental way.
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Mr. HOYER. Can I say somewhat cynically, about 2 weeks ago we spent——
Mr. APFEL. The highway bill?
Mr. HOYER. Yes. And we don't have $28 billion. We don't know where it is coming from. It may come out of the hide of this committee, people who need food, people who need health care, people who need education and job training. It may come out of their hide, as it did before when 800,000 were put out on the street, out of housing, which is one of the offsets we passed in the supplemental, as you know, or cutting out AmeriCorps.
Mr. PORTER. The Chairman hopes we can resolve this by taking it out of the hides of the tobacco industry, personally, and hopes that the President and others will push on the agenda a great deal.
Mr. HOYER. A far, far better prospect.
Mr. PORTER. But, again, if there is a surplus, it is going to be spent. There is just no doubt about it. And if you start with that as a given, you know that you have to do something different about what we have done to protect Social Security. It hasn't worked, and it won't work, and it won't work in the future. So let's open our minds to what we can do to put in place a really good Social Security system that will produce for people and will be out of the clutches of future Congresses and Administrations that can't resist spending anything that even looks like a surplus, obviously.
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Mr. HOYER. Mr. Chairman, if I can finish my remarks, there should at least be enough money next year to make sure it works well for 12 more months; right, Mr. Apfel?
Mr. APFEL. You took the words out of my mouth.
Mr. PORTER. All right. Back to the mundane questions.
Mr. HOYER. Thank you.
LEGISLATIVE PROPOSALS
Mr. PORTER. Thank you, Mr. Hoyer.
Mr. Apfel, you explained that your request for redeterminations and claimant representative payments is critical to the agency's ability to perform adequately. Both of these initiatives require authorizing legislation that is not proposed for inclusion in our bill. Have you been in touch with the authorizing committees on these matters, and do you expect that we will have the necessary legislative authority to comply with your requests?
Mr. APFEL. That is our hope and expectation. We certainly have been in contact with the authorizing committees and we hope to be working with the authorizing committees, the appropriations committees and the budget committees. We will work with anybody. We want to see this proposal be enacted into law. If it is not there, we have a sizable hole that we need to determine what to do with. We have been in touch with them. I am optimistic that action will take place and would hope for your support in this endeavor.
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OFFICE OF PROGRAM AND INTEGRITY REVIEW
Mr. PORTER. Your authorizing committee asked us to look into the Office of Program Integrity Review on their behalf. In fiscal year 1997, what was the budget for OPIR and how many FTEs were assigned to it?
Mr. APFEL. Fiscal year?
Mr. PORTER. 1997.
Mr. APFEL. I don't have 1997. OPIR in 1995, halfway through 1995, was 1381 FTEs. I will get you the dollars for the record, sir.
[CLERK'S NOTE.—Later changed to ''FTPs''.]
[The information follows:]
FY 1997 BUDGET FOR OPIR
The FY 1997 budget for OPIR was $88 million and included 1,192 full-time permanent (FTP) staff.
Mr. PORTER. All right. Mr. Apfel, critics of your automation rollout have suggested that the 100 megahertz processors you purchased are obsolescent. They can't handle your software efficiently and will need to be upgraded shortly. Is there any other enterprise of your size and complexity using 100 megahertz processors, and does the agency have a technology refreshment contract as opposed to an obsolescence contract?
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Mr. APFEL. Can I go back to the first question for one second, which has to do with the roles of OPIR and the Office of Inspector General?
Mr. PORTER. Oh, sure.
Mr. APFEL. When I was first confirmed, one of the issues before the agency was the respective roles and responsibilities of OPIR and the Office of Inspector General, and some tensions existed about the roles and responsibilities of the two organizations. One of the actions I took was to definitively articulate what the roles and responsibilities of the two activities are, and I believe that the Inspector General could comment on this as well.
It is, from, say, the 1995 to 1998 period of time, the Inspector General's Office will be increasing staff significantly, by roughly 200. OPIR has gone down by about 300 during this period of time, so there has been a shift that continues in terms of resource allocations. [CLERK'S NOTE.—Later changed to ''200''.] But it is very important, that function that OPIR handles is a very important one for the Commissioner, and I believe the Inspector General agrees with this, to provide management analysis, to provide insights, reviews, for me, and needless to say, the roles and responsibilities of the Inspector General are also centrally important.
What I have asked for and what I will be receiving in the future is a plan of work activities for both organizations, which I think will help ensure the appropriate separation of responsibilities. But are both functions important? Absolutely.
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Mr. PORTER. Thank you. You just answered question 9.
ONE HUNDRED MEGAHERTZ PROCESSORS
Mr. APFEL. The second question you asked?
Mr. PORTER. One hundred megahertz processor.
Mr. APFEL. One hundred megahertz processor. I have received several briefings on this. I remain convinced that the decision to go forward with the current contract is appropriate and cost-effective. One hundred megahertz systems fully meet the needs of the Social Security Administration through the IWS/LAN. Going to larger computers would cost a heck of a lot more, Mr. Chairman, and I don't see any cost-effective way to justify such an activity.
Could we spend more money for larger systems? We probably could. Will we need to do some operating, as we look to the future, to some form of technology upgrade? That is entirely likely for the years ahead. But the purchase that we made was appropriate for the needs of the organization, for one; and, two, cost-effective; and I think it was the right thing to do. And, clearly, if somebody would—clearly, somebody would like to sell us more expensive computers. I don't think that makes cost-effective sense, and it is a waste of American taxpayer dollars.
TECHNOLOGY REFRESHMENT
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Mr. PORTER. Do you have a refreshment contract?
Mr. APFEL. We do not have a refreshment contract per se. We have a clause in our contract to enable upgrades, but it is not a specific refreshment contract, if I am correct in that. We have a changes clause and the technology substitution clause, and with those we believe we can accomplish anything we might need to accomplish. But, again, it has been my assessment that this would be a waste of money at this point in time.
EXPENSES RELATED TO UNION ACTIVITIES
Mr. PORTER. All right. On January 27, you sent us a letter indicating that expenses relating to union activities conducted on official time have declined substantially to $12.4 million. Do you use the same methodology to compute these expenses for 1997 as in previous years, and if so, what is the reason for the decline in the use of official time?
Mr. APFEL. I believe, Mr. Chairman, that the methodology from 1996 to 1997 was identical for official time. We now have just put in place a fairly sophisticated reporting system to be able to track hours of official time. That went up, I believe, within the last month, month and a half. I am unaware of any specific methodology change between 1996 and 1997, in terms of the calculations of official time.
Mr. PORTER. What is the reason for the decline, then?
Mr. APFEL. The decline is due to the reduction in the number of hours, and actually a similar reduction in the number of full-time union representatives. It is basically personnel reductions, the number of hours of official time has declined. We have also seen a decline in the number of unfair labor practices, grievances, as well. So there has been a decline in the personnel costs side of official time, as well as a modest reduction in the number of full-time workers who are engaged in—who work for Social Security that are 100 percent—they are called 100 percenters, which is full-time union activities.
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CONTINUING DISABILITY REVIEW COST-BENEFIT RATIO
Mr. PORTER. We provided the CDR funding based on the CBO assumption that such spending would have a substantial benefit/cost ratio. As SSA looked back as the results of CDR processing to determine how much has been saved, what are the savings and what is the ratio of savings to expenditures? If you could provide a comprehensive response for the record, and explain the methodology, we would appreciate that as well.
Mr. APFEL. I will, sir. Right now the historical rates are somewhere around 11 to 1 in terms of savings. We expect that to decline in the future to about 6 to 1, because we are picking the low fruit at this point in time in dealing with some of the easier cases, frankly. As we move to a larger volume of cases, we expect that to decline some, but still be in the range of about 6 to 1. And we will provide for the record a specific analysis of how we came to those figures, both historically as well as future projections.
[The information follows:]
"The Official Committee record contains additional material here."
LONG-RANGE GOALS FOR DISABILITY CLAIMS AND HEARINGS
Mr. PORTER. The performance plan indicates targets of 26 percent of SSI disability claims decided within 60 days of filing and only 15 percent of hearing decisions made and notices sent within 120 days of filing. What is a reasonable long-term goal for these indicators, what should we expect SSA to be able to do ideally in these areas, and why did you choose 60 days and 120 days as your thresholds?
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Mr. APFEL. I think that was the appropriate threshold, given my confidence in changes to the system over the long run. What I would like to be able to do is reassess by next year those targets, after we have made decisions on disability redesign, and determine whether more appropriate levels are called for. I think these are appropriate for now. I would like to revisit them this year.
OLD-AGE AND SURVIVORS (OASI) CLAIMS PROCESSING
Mr. PORTER. You indicated a target of 83 percent of OASI claims processed by the time the first regular payment is due, or within 14 days of the effective filing date. What has been your historic rate for this indicator and why shouldn't this be closer to 100 percent?
Mr. APFEL. I am going to have to get an answer for the record on that, Mr. Chairman. I am unaware of this statistic.
[The information follows:]
"The Official Committee record contains additional material here."
COMPARISON OF PERFORMANCE COMMITMENTS TO ACTUAL PERFORMANCE
Mr. PORTER. Can you submit for the record a chronology of the agencies' performance commitments and actual figures, beginning with the fiscal year 1996 budget hearing?
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Mr. APFEL. Absolutely.
[The information follows:]
"The Official Committee record contains additional material here."
RECONSIDERATION REVERSAL RATE
Mr. PORTER. What is the rate at which initial disability claims decisions are overturned by reconsideration, what is the overturn rate for hearings, and can you provide a table for each of the last 5 years?
Mr. APFEL. We will, sir. The reconsideration rate is relatively low. The OHA rate is considerably higher. I would point out that one of the main objectives of the disability redesign is to try to realign these activities. I think what we will have to have are higher approval rates at the DDS level and lower overturn rates at the ALJ level. We also need to look at the reconsideration step to determine whether it is redundant, whether we can establish a system that would not have the reconsideration step and, in lieu thereof, ensure that there is an individual contact, a predecisional interview with the applicant, rather than the reconsideration.
So we are talking about two things at once here. But one of the things we have to be able to do is determine the efficacy of the reconsideration process. It is not a very high overturn rate but it is another bite of the apple. Can we improve the system at the front end so there is no need for the reconsideration, which also chews up quite a bit of time, but at the same time have some contact with the individual and test out whether information is accurate in their files, which would come from the face-to-face, or some telephone contact at least? That is step one. The other piece of it again is to find ways to achieve process unification, where the organization as a whole is working on the same framework in terms of decisions. It is true, the later in the process, the more detailed the records are. Attorneys provide very detailed information that wasn't available to the DDS. I understand all that. There is never going to be a pure confluence within the system. That is why we have an appellate system. But we have to move the system forward so that all the players in the process are using the same ground rules, the same cultural rules in terms of looking at the cases.
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So with both process unification, as well as some of the changes in terms of a reconsideration, I believe we will see a significant change in those. We have seen a slight increase already in the number of approvals, the proportion of approvals at the levels of the DDSs, and a lowering within the Office of Hearings and Appeals. That is promising, and we will provide that for the record, but ultimately we want to keep our eyes on the ball. That is the ball we need to be looking at.
[The information follows:]
"The Official Committee record contains additional material here."
WORKERS' COMPENSATION EXPENSES
Mr. PORTER. The major component of the automation initiative has been the purchase of systems furniture, particularly ergonomic components. A primary justification of this expenditure is an anticipated reduction in workers' compensation expenditures. Data submitted by Dr. Callahan on page 1372 of the Fiscal Year 1998 hearing volume indicates that workers' compensation expenditures continued to rise. Please update the information in that table and tell us why workers' compensation expenditures have not decreased as anticipated.
[The information follows:]
"The Official Committee record contains additional material here."
ELECTRONIC PAYMENTS
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Mr. PORTER. Will SSA fully comply with P.L. 104–134, regarding electronic payments, and what percentage of benefit payments do you expect will be made electronically by January 1, 1999?
Mr. APFEL. The PL you are referring to, this is the electronic payments?
Mr. PORTER. Right.
Mr. APFEL. I will provide for the record the actual projections that we now have. We are clearly moving in the direction of an increasing proportion of beneficiaries receiving their payments electronically, and this is a good thing to do. It is good for beneficiaries in terms of lost checks, stolen checks. It is a cost-effective measure.
The question is: Will we need a broad-based waiver authority for individuals who cannot or strongly desire not to receive their checks electronically? And the answer to that is yes. We have been working with the Treasury Department to make sure that once the electronic benefit transfer system is established to complement the electronic funds transfer system, that there be a broad-based waiver authority for people to be able to opt out of the system.
So I will provide for the record the ramp-up taking place, which I think is appropriate. But we should never expect the number to get to 100 percent because some people do not want to and won't be part of this new system.
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[The information follows:]
ELECTRONIC PAYMENTS
SSA has made significant progress in meeting the objectives of P.L. 104–134. At present, over 71 percent of Social Security payments and 40 percent of Supplemental Security Income (SSI) payments are issued by means of direct deposit. Further, nearly 90 percent of new Social Security beneficiaries are being paid by direct deposit from the outset of their entitlement. We expect that by January 1, 1999, 75 percent of Social Security payments and between 45–50 percent of SSI payments will be paid by direct deposit.
One of the major challenges facing SSA and other program agencies, however, is the ability to meet the January 1, 1999 deadline without the availability of a national electronic payment program for the unbanked. An estimated 7 to 8 million Social Security and SSI recipients do not have a relationship with a financial institution and are not likely to be able to establish one without assistance from the Government.
SSA believes the most feasible means of meeting the objectives of P.L. 104–134 is to implement the Final Phase requirement at the point in time the Department of the Treasury's electronic transfer account (ETA) program becomes available nationally. The Final Phase requires all persons entitled to Federal payments to be paid by direct deposit or some other form of electronic funds transfer by January 1, 1999. At the time the ETA accounts are available, SSA will send notices to all remaining check receivers. Beneficiaries with bank accounts will be informed of the need to enroll in direct deposit. Those who do not have a relationship with a financial institution will be encouraged to establish one. At the same time, they will be provided with information about the ETA program including instructions on how to enroll. All check receivers will be informed of the waiver conditions established in Treasury's final regulations. SSA believes it can fully implement the Final Phase requirements of P.L. 104–134 within 9 months of the availability of the national ETA program.
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Mr. PORTER. The remaining questions we have are for the record.
We thank you for your excellent opening statement and for answering of all our questions, and we know you are going to do a good job as our Social Security Commissioner. I would close by urging you not to trust government with surpluses or reserves. It doesn't work.
Mr. APFEL. I sensed that you feel that way, sir.
Mr. PORTER. Thank you very much. The subcommittee will stand in recess until 2:00 p.m.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Thursday, April 23, 1998.
CORPORATION FOR NATIONAL SERVICE
WITNESSES
HARRIS WOFFORD, CHIEF EXECUTIVE OFFICER
DIANA LONDON, ACTING DIRECTOR, AmeriCorps*VISTA
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TOM ENDRES, DIRECTOR, NATIONAL SENIOR SERVICE CORPS
LOUIS CALDERA, CHIEF OPERATING OFFICER
Mr. PORTER. The Subcommittee will come to order. We continue our hearings on the Fiscal Year 1999 budget with the Corporation for National Service. And we are pleased to welcome the Chief Executive Officer, Senator Harris Wofford.
Senator, it is very good to see you again, sir.
Mr. WOFFORD. It is good to be back, Mr. Chairman.
Mr. PORTER. If you would introduce the people you brought with you and please then proceed with your statement.
Mr. WOFFORD. My team, left to right, is Chief Operating Officer Louis Caldera; Tom Endres, the Director of the National Senior Service Corps, the three programs of the Senior Corps; and Diana London, the Acting Director of VISTA; the two parts of our program that are before you again.
Mr. Chairman and members of the Committee, I am delighted to be here. I want to begin by thanking this Committee for its history of support for VISTA and the three programs of the Senior Corps and for the increases provided last year that have allowed us to expand our longstanding and successful efforts in education and childhood literacy.
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My written testimony details our progress on many fronts, including the growth and accomplishments of national service, our collaboration with Big Brothers/Big Sisters, and other leading nonprofits, new partnerships with the private sector, improvements in our financial management, and steps we are taking to expand service opportunities while reaching for higher quality and greater community impact.
The accomplishments listed are just a small fraction of what got done, but they give a glimpse of what members of VISTA and senior volunteers are achieving in communities nationwide, not just in hours served but in outputs and results: higher reading levels, lower dropout rates, more children immunized and more adults who have moved from welfare to work.
More than ever before, our programs are focused on: meeting serious needs, demonstrating clear results, and building sustainability for the long term. And I want to thank you, Mr. Chairman and your colleagues, for your leadership, encouragement, and support in moving us in this direction of results, meeting serious needs, and sustainability.
Let me highlight our work in two areas. First, we are hard at work on a goal shared by governors, school superintendents, employers, parents, the President, and former Presidents of making sure that all children read independently and well by the end of the third year.
For us this is not a new focus. RSVP volunteers and Foster Grandparents have been involved actively in children's literacy since the 1970s. And last year they served in more than 8,500 schools, 2,300 Head Start centers, 2,200 libraries.
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For two decades, VISTA has helped groups like Literacy Volunteers of America, Lauback Literacy Action, and Communities and Schools recruit, train, and mobilize tutors.
These and other organizations know the key to successful tutoring is having well-trained, reliable, and consistent volunteers; something VISTA and the Senior Corps offer.
The increases provided last year are allowing us to expand the reach and effectiveness of our efforts, adding 8,500 RSVP volunteers, 1,200 foster grandparents, and more than 2,000 new VISTAs to serve as tutors and tutor coordinators in existing local literacy programs.
Second, National Service is creating economic opportunity and saving taxpayer dollars. VISTA has worked with more than 2,000 businesses across the country to obtain employment for welfare recipients and others who are unemployed.
Members arranged development capital for 430 small businesses and helped establish or expand nearly 800 microenterprise businesses in low-income communities.
Senior companions helped 37,000 frail adults live independently. And you save about $35,000 a year for every senior that is able to remain at home for a year who might otherwise have been in a nursing home; costs that otherwise would have fallen on the family or on taxpayers through Medicare or Medicaid.
Results like these can be found in every area of service, whether health and nutrition, improving public safety, cleaning the environment, expanding affordable housing, helping the homeless find shelter and jobs. This service is highly cost-effective.
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The Westat accomplishment study you received shows that for every federal dollar invested in VISTA, $3.30 is returned to the community. In total, VISTA members raised $82,000,000 for the projects in which they worked last year, and they recruited more than 140,000 local volunteers. That is an average of 42 volunteers and $24,000 generated by each VISTA member.
The Senior Corps is just as effective. Last year Senior Corps projects received $93,000,000 in local support, far exceeding the matching requirements set in law.
A major goal of both the Senior Corps and AmeriCorps*VISTA is to expand service opportunities while reaching for higher quality and impact. For example, the aging of America gives us an extraordinary opportunity to expand senior service. We have the largest group of seniors in our history, more than 55,000,000 who are over the age of 55. And this number will double again over the next 30 years.
But the numbers are neutral. What they add up to depends on us. If we tap skills and experience of older Americans, if we mobilize senior power in a structured and organized way, then we will have a tremendous force for tackling some of society's most difficult problems.
To best use this resource, we have implemented a full-scale reform of Senior Corps programs designed to enhance efficiency by, above all, increasing opportunities for outcome-oriented service. Programming for impact, as we call it, focuses on community needs in the planning and development of Senior Corps projects and in measuring the results.
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Following your guidance and the goals of the Government Performance and Results Act, the Senior Corps has changed the way it does business. Programming for impact is now our established policy and has been introduced at every level of the Senior Corps.
Then consider VISTA. The core mission of VISTA is strengthening the capacity of nonprofits serving low-income communities to achieve their goals. Organizations requesting VISTAs plan from the beginning to sustain the work which VISTA has helped them initiate.
A recent evaluation found that this works. Nearly 73 percent of the projects on which VISTA has worked continue to operate years after the members had completed their assignments.
Another way VISTA expands service and increases impact is cost-sharing. State and local governments and nonprofits are increasingly providing funds to expand the number of VISTAs while the Corporation For National Service provides only education awards and recruitment and training assistance.
Today some 200 sponsoring organizations contribute over $13,000,000 to this effort, up from $5,000,000 4 years ago, supporting more than 1,300 VISTAs. And that number is growing every year.
Mr. Chairman, next Monday in Chicago, General Powell will give his one-year report to the nation on the progress towards the goals for children and youth set a year ago at the Philadelphia summit of all the Presidents. While much has been accomplished, General Powell will reinforce how far we have to go to help turn the tide for millions of at-risk children and see that they get the five fundamental resources declared at Philadelphia, which they need to live healthy and productive lives.
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As in the past, VISTAs and Senior Corps volunteers are in the forefront of this campaign helping children, both through their direct service and through the volunteers they recruit and mobilize.
Now more than ever, our nation needs their service, not just to help at-risk youth have a brighter future but to help Americans of all ages and backgrounds make things better for themselves, their families, and their communities. That is what national service is all about.
My colleagues and I will be happy to respond to any questions and continue to take your leadership, Mr. Chairman.
[The prepared statement follows:]
"The Official Committee record contains additional material here."
Mr. PORTER. Thank you, Senator, for your excellent opening statement.
Do I get to be a senior if I am 55 now?
Mr. WOFFORD. I celebrated my 72nd birthday skiing at Big Sky after 12 days of visiting projects in 8 states, and I was able to return to my mediocre intermediate-level skiing.
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Mr. PORTER. I got my first senior discount at the movie not long ago. And then I went again and forgot to ask for it.
Mr. WOFFORD. I think you get your——
Mr. HOYER. I think, with all due respect, those of us who have been there, Congresswoman Pelosi said that you did not forget.
Mrs. PELOSI. If I may respond, will the gentleman yield?
Mr. HOYER. Certainly.
Mrs. PELOSI. What I said, there was a joke that came through when you said that there were 55,000,000 seniors in America over 55 years of age. And we did not know that was the new marker.
Mr. PORTER. Yes, right, exactly.
SENIORS ARE GROWING IN NUMBER
Mr. WOFFORD. Actually, it is going up every day. I have already shifted to speaking about 60,000,000 seniors. And, by the way, one of the things we try to do is recruit more seniors who have retired or are free much earlier than before.
I think the average age of our senior programs has been over 70. We would like to see that average go down and attract not just the very elderly, who live longer and better lives by volunteering, but some people who come out of their years of work while they are really ready to try to apply some of the things that they are thinking about, not full-time but part-time. We are making a special effort to recruit a whole range of very talented seniors that are not in some of the categories that were filling the volunteer programs in years past.
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Mr. PORTER. The Subcommittee will operate under the seven-minute rule. The Chair has to chair a luncheon right at noon. So we are going to have to stay on our schedule.
Senator, an independent evaluation completed in F.Y. '97 found that nearly 73 percent of AmeriCorps*VISTA-supported programs continued to operate years after the VISTAs had completed their assignments. Why do you think your program has been so successful in getting the community to take over and sustain those activities?
VISTA SUSTAINABILITY
Mr. WOFFORD. Well, in the first place, they are their—that is the community's—programs. We, as in the other parts of AmeriCorps, respond to the priorities and needs of local nonprofit organizations who usually select their own members. They administer them and deploy them. It is very different from the way the Peace Corps operates—it selects, recruits, trains, deploys—and in a sense runs programs overseas.
The reason the sustainability I think comes about is the talent of the VISTAs and the qualities that they bring to their service; the enthusiasm they bring to the job and the success of what they do. What they do is what those local nonprofits badly wanted.
Take Habitat for Humanity. Millard Fuller badly wants the Habitat for Humanity units, who have no staff and who may be doing one house a year, to be jump-started. Those units want some help. And they are finding that VISTA AmeriCorps members, as well as other AmeriCorps members, can come in and help do what they have urgently wanted to do.
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Mr. PORTER. The Committee was very concerned when it learned that in July 1997 the corporation's Office of Inspector General and Arthur Andersen identified 21 material weaknesses in reportable conditions.
It is a priority of the Committee to ensure that these problems get resolved in a timely manner. When do you expect to receive a clean audit?
STATUS OF AUDITABILITY
Mr. WOFFORD. There is no higher priority for us. We started with 99 findings and recommendations that were identified just as I arrived as CEO. We had hoped that we were closer to completing all 99, but the report, as you said, found that we still had 21 to go.
We now have an all-out plan with the direct and committed involvement and help of top leadership at OMB. They are doing with some other agencies facing the same problems. We have a plan to get a clean audit for the next fiscal year.
Our Chief Operating Officer is the key person on that front. If you would give him a few words, I think Louis Caldera might contribute something to the response.
Mr. CALDERA. Mr. Chairman, Louis Caldera.
We have set for ourselves a goal that we would have unqualified financial opinions for F.Y. '98. We currently have a plan that we are executing with milestones and deadlines that we issued on March 18th. We have committed to reporting to the Congress every 60 days on our progress on that plan. We are resourcing it, and we are on our way to accomplishing those goals.
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About ten of the items that were on that list last summer have been completed, but we want to test to make sure that the corrections that have been put in place are working effectively.
Mr. PORTER. Thank you, Mr. Caldera.
Senator Wofford, in F.Y. '99, the America Reads initiative will expand from its initial level of 370 service years at the end of F.Y. '97, or 12 percent of the overall program, to nearly 2,400 service years, or 44 percent of the overall AmeriCorps*VISTA program. Is this expansion coming at the expense of existing programs?
LITERACY AND AMERICA READS
Mr. WOFFORD. No, although I think it is important to realize that one of the values of having a nationwide goal, such as seeing that every child reads by the end of grade three, is that it focuses resources. And that focus can be of tremendous importance.
This is a goal that, as you know, the President proclaimed. The budget agreement allocated resources to support activities that will help achieve that goal. But it is a nonpartisan, bipartisan universal goal. Governor George Bush of Texas six months before the President did, proclaimed literacy as the most profound goal of his administration. City after city is doing it.
We are not diverting resources to achieve that goal, thanks to the support of Congress. You have given us extra resources for that goal. And it is possible that you would not have given us extra resources of this kind if there had not been a rallying to this big nationwide goal.
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It is not a nationwide or federal-run program. As you know VISTA operates through local programs. Having that goal is I think very important to the nation.
Mr. PORTER. So that other regular VISTAs are not declining as a result of the increase in America Reads.
Mr. WOFFORD. No, they are not.
Mr. PORTER. All right. In addition to your agency, the Department of Education is also very involved in the America Reads initiative. Could you provide us with examples of ways in which you and the Department of Education collaborate on this initiative?
COLLABORATION WITH EDUCATION DEPARTMENT
Mr. WOFFORD. We are cooperating fully in a joint and collaborative effort to offer to the diverse additional resources going into children's literacy training in regional programs around the country.
Secondly, we have consulted and planned, about how we tap the best information from the Education Department, from literacy programs around the states, and how they may benefit from our own experiences, which is very extensive in this area, about the best programs we have discovered at the local level.
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The cooperation is very full. They are seeking Congressional authorization to expand in this area. It is an area we have been in from the beginning. Our involvement is already authorized. And we are fully engaged in it around the country. We are making the successful results of what is happening in Houston Reads, Baltimore Reads, Boston Reads and other programs we are supporting available to the Education Department as they plan further their role.
Mr. PORTER. Thank you, Senator.
Mr. Hoyer.
Mr. HOYER. I would——
Mrs. LOWEY. In fact, I was going to yield to Mrs. Pelosi.
Mr. HOYER. Mrs. Lowey has to leave. Mrs. Lowey was here before and Mrs. Pelosi.
Mr. PORTER. Well, actually, all of you were here at the beginning of this segment of our hearing. So I assumed you would go in seniority order.
Mrs. Pelosi.
Mrs. PELOSI. Thank you very much, Mr. Chairman.
I appreciate the courtesy of my colleagues because I have to chair a briefing right now, at 11:45. But I wanted to commend Senator Wofford for his great leadership and his associates who are with him today. I wanted to call attention to Louis Caldera, who was a former member of the State Assembly in California, who was a distinguished member then, and commanded the respect of his colleagues. And we were so delighted that he wanted to come to Washington and be part of this great effort.
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Mr. Wofford knows the admiration that I have for him and his commitment to volunteerism. And obviously with his associates here, Ms. London and Mr. Endres, you are in the leadership of the most wonderful part of our great country: the full participation of all Americans.
I will submit my questions for the record, but I wanted to formally welcome Louis Caldera. He was a great resource to us in California and now is nationally.
Thank you, Mr. Chairman. I thank my colleagues.
Mr. PORTER. Thank you, Ms. Pelosi.
Mr. WOFFORD. Thank you.
Mr. PORTER. Who do you want me to call on next?
Mr. WOFFORD. We thank the California legislature for the term limits that enabled us to get Mr. Caldera.
Mrs. PELOSI. Thank you.
Mr. PORTER. Mr. Hoyer.
Mr. HOYER. Let us not go overboard on thanking. [Laughter.]
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I suppose California's loss, however, is the Nation's gain. Ms. Pelosi has regaled us all about how beneficial it has been for you to be here.
Mr. CALDERA. Thank you.
Mr. HOYER. The Senator is also extraordinary beneficial. A loss to the people of Pennsylvania, but not to our Nation. I think the President chose wisely. You have done an outstanding job. I am an enthusiast for this program, as you know, which is under some critical challenge from time to time.
Maybe this question was asked. I was reading along with your statement. In terms of the objective of achieving self-sufficiency for VISTA, how do you at this point in time rate that as——
Mr. WOFFORD. The objective of efficiency——
Mr. HOYER. Self-sufficiency.
Mr. WOFFORD. Self-sufficiency, sustainability of programs?
Mr. HOYER. Yes, sir.
VISTA'S SUCCESS
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Mr. WOFFORD. I think the VISTA record, for example, is outstanding. It has been evaluated in a major study that you recieved and one that you will soon get. I think we have given you the draft of it.
Ms. LONDON. Well, actually, the sustainability study was submitted to the committee last year in final. And our intention is to update that study in F.Y. '99.
Mr. WOFFORD. It was last year's study, I think that showed a 22 percent increase in sustainability over the year before. And we think you will see further progress reflected in the study that is going on now.
I think one reason that, as far as I know, the VISTA Program has not been a lightning rod for criticism is that it has been at work for 30-some years. It has been tested. It has learned as it went along how to do it better and better. And we are very proud of the record of VISTA on every front, especially its work in children's literacy.
Mr. HOYER. Senator, perhaps it is in the report here or in your statement. What do we estimate is the matching resources, either in kind or dollars, with respect to all of the programs that come under you? Now, the reason I ask that is that we are now asking for I guess $278,000,000. Is that the request? Am I recalling the number correctly?
Mr. WOFFORD. Yes.
Mr. HOYER. Two hundred and seventy-eight million, which is about a $21,000,000–$25,000,000 increase. How much do we leverage from that in the country?
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LEVERAGING FEDERAL RESOURCES
Mr. WOFFORD. Diana London and Tom Endres may want to add to this, but on VISTA, cash contributions found by the Westat study for the '97 fiscal year were $37,000,000; in-kind contributions, $45,000,000; community volunteers using the Independent Sector's of evaluation of volunteer hours, $55,000,000, which is $137,000,000. And AmeriCorps*VISTA members mobilized $3.30 in local support for every appropriated dollar spent on the program in '97.
I think I mentioned that each VISTA is estimated to recruit 42 community volunteers and mobilize $24,000 in local resources. One of the main things VISTA does is mobilize local resources for local projects.
Maybe Tom Endres would like to comment on the senior programs.
Mr. ENDRES. In response to your question, Congressman, for the Senior Corps programs, first, for the Foster Grandparent Program, the nonfederal local contribution to the Foster Grandparent Program last year exceeded $32,000,000, which represents 42 cents for every federal dollar invested, well above the 10 percent matching level required by law.
For the RSVP program, the projects received over $42,000,000, exceeding the federal contribution and clearly demonstrating broad-based support for the Retired and Senior Volunteer Program.
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The Senior Companion Program is the youngest and the smallest of the three senior programs. Their nonfederal local contribution was over $19,000,000. And that nonfederal contribution represented a match of 61 percent, well above the 10 percent matching requirement by law.
The senior programs are doing very well in mobilizing non-Corporation, nonfederal resources to provide increased service opportunities across the nation.
Mr. WOFFORD. Could I add one other, Mr. Hoyer?
Mr. HOYER. Certainly, Senator.
Mr. WOFFORD. The other measure of this is the cost-sharing that is growing. From 1994, there were $5,000,000 paying for 560 full-year service by VISTA service years. It has increased 160 percent in the last 4 years. It is now more than $13,000,000 in Fiscal Year '98, contributed by local, state, and nonprofit organizations. They are now paying for more than 1,300 VISTAs.
Mr. HOYER. Well, let me follow that. It was $5,000,000 in 1994?
Mr. WOFFORD. Yes.
Mr. HOYER. And it has gone to $13,000,000?
Ms. LONDON. Sixty percent increase.
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Mr. WOFFORD. No.
Mr. HOYER. No, no.
Mr. WOFFORD. It is 160 percent.
Mr. HOYER. It is more than——
Mr. WOFFORD. I figured it out this morning. From 5,000,000 to 13,000,000 is 160 percent.
Mr. HOYER. It may be 260 percent.
Mr. WOFFORD. Okay.
Mr. HOYER. Ten would be a 200 percent increase, would it not?
Mr. WOFFORD. Thank you. I yield to higher mathematics.
Mr. HOYER. Well, no. I am just——
Mr. WOFFORD. It is my mediocre intermediate mathematics on this point.
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Mr. HOYER. No. At the University of Chicago, they are much better thinkers, however. I know that. So I will not get into that kind.
I understand that the supplemental reduction is not in programs covered by this Committee but, rather, the VA–HUD Committee. If we cut the budget, would there be, in effect, a geometric reduction? I do not know whether that is the way to say it, but a multiple reduction at the local level, so that cutting back a dollar might result in three dollars loss of service?
Mr. WOFFORD. The last calculation I would have to think through. But would there be a major reduction? A reduction in the programs would naturally follow any reduction in our appropriations.
Mr. HOYER. Senator, on VISTA, for instance——
Mr. WOFFORD. Yes.
Mr. HOYER [continuing]. You said there was a 3.3 factor.
Mr. WOFFORD. Yes.
Mr. HOYER. So if we spend $1 here, locals and volunteers spend 3.3. What I was trying to extrapolate is that if we cut back on this program, which is generating so much volunteer service, in-kind contributions, and others, it is not just cutting back a dollar at the federal level. It will have I think——
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Mr. WOFFORD. Yes.
Mr. HOYER [continuing]. A magnified effect at the local level.
Mr. WOFFORD. There is a simple way to answer affirmatively. This is essentially a people power program. It supplies people. It is the individual VISTA working for a Boys and Girls Club or a Habitat for Humanity Unit that mobilizes the volunteers, helps raise the money. And if that VISTA is not there, which is what happens when you cut this program, those achievements would not take place. Both the financial return to those agencies and the leadership in carrying out a project that those local agencies badly want to carry through would be lost.
Mr. CALDERA. If I may add to that, although there are unobligated funds, because of the nature of our grant cycle most of those funds, although they have not been obligated, have been promised to local groups. So with respect to 85 percent of the money, commitments have been made.
So we are talking about gutting programs that are currently operating and are planning to operate next year which would see their funding taken away. So they would have to let people go whom they are already planning to hire and stop programs that they are already planning to execute.
Mr. WOFFORD. That is particularly true of the grant programs that are being used, particularly for the children's literacy effort. The VISTAs that are not on grant programs are on a direct federal payroll. And when the money for that is lost, there is an even faster reduction than when there is a little advance time on a grant.
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If you have a grant and the next funds for it are cut off, they stop planning for it. But when the government closed down, VISTAs stayed on the job, almost all of them with no living allowance at all.
Mr. HOYER. Thank you, Senator. I know my time is up and Ms. Lowey needs to get in before 12:00 o'clock.
Mr. PORTER. Thank you, Mr. Hoyer.
Ms. Lowey.
Mrs. LOWEY. Thank you, Mr. Chairman. And I join my colleague Senator Wofford in welcoming you to this Committee. You have had such a distinguished career of public service. And we are indeed fortunate that you have chosen to continue to serve us in this vital organization.
I continue to be impressed with the breadth of activities that the corporation is involved in. And I am particularly impressed with the partnering that you have done with groups such as Big Brothers, Big Sisters, and others in order to leverage the funds that are appropriated to you. So I want to thank you personally for your leadership.
I am impressed with so many of your areas of service. I would just like to focus on a few. First of all, I understand that AmeriCorps*VISTA members will be involved in welfare-to-work activities. And one of these projects is actually taking place in the South Bronx.
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I think it would be very interesting for this Committee to hear about these welfare to work activities and specifically that one if you care to elaborate.
HIGH BRIDGE VISTAS
Mr. WOFFORD. That is High Bridge? Diana London can talk about the High Bridge Program. I am looking forward to seeing it in action myself.
Mrs. LOWEY. I would love to join you.
Ms. LONDON. The High Bridge Community Life Center is actually located in the empowerment zone in the South Bronx. We have had VISTAs there for three or four years working directly with low-income residents including welfare recipients on job training activities that are leading to permanent employment with organizations like UPS and the local hospital that is hiring nurses' aides.
The VISTAs have actually institutionalized a job training program that is a direct feeder to those two corporations. It has been extremely successful. VISTA's have gotten local businesses in the area to commit to a job bank.
They have hired about 200 local residents in permanent employment. We have been absolutely amazed at how successful this project has been. And that is just one example.
Another one I will mention that is a different approach to welfare-to-work is Working Capital, which is an organization in Massachusetts. We have VISTAs working on a statewide basis with peer lending for small and micro businesses in the area. They are working on loan applications, loan approvals, hooking up micro-enterprise businesses with universities to get business training from them.
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And over the past year, we had about 260 micro-businesses established as a result of their efforts. It is another project that we are really, really proud of.
Mrs. LOWEY. I also serve on the Foreign Operations Subcommittee. Congresswoman Pelosi and I have been very passionate advocates, as you may know, of micro enterprise. And to see this utilized in the United States I think is very important. I would like to get more information from you and documentation as to its success because it can work.
You know it can work. And I think if we can expand this idea, we can certainly help thousands and thousands of women and men enter into jobs and into businesses that can help them and their families and the community. So I want to particularly congratulate you.
Another area, AmeriCorps places a significant value on enabling programs to achieve self-sufficiency. In fact, in looking at your information, one study found that over 70 percent of VISTA projects continued to operate after VISTA members depart. I think that is particularly important for this Committee to know that our investment has enduring value in the community. This is really terrific.
Could you discuss with us how this self-sufficiency is achieved? Do VISTA members provide organizational and management skills to local organizations? I mean, 70 percent is tremendously effective. Could you share with us how you achieve that?
Ms. LONDON. Yes. I actually think there are three main reasons for that. One is, as Mr. Wofford alluded to earlier, VISTAs are there to mobilize resources in low-income communities. Mobilizing cash and in-kind resources certainly helps to create sustainable programs as does the notion of recruiting community volunteers who will stay in the community and continue to provide their services.
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I think another aspect of it is what we call VISTA's role in organizational capacity-building, where to some degree our members are really involved in providing structural improvements in organizations.
They set up procedures. They set up databases. They set up training programs. They do community outreach for the organizations. They are really enabling those organizations to become stronger themselves to continue to promote and sustain the programs that the VISTAs have been working on.
Mrs. LOWEY. Why are they so good? Maybe you can tell us. I think that is an important question. I would be interested in what kind of training you provide to these VISTA volunteers so that they can be so effective.
We were talking in the last hearing about excellence and how can we ensure excellence in the programs we fund.
Ms. LONDON. I think again it is a combination of factors. One is that our programs are generally quite small. Our projects average about four to five members. Our corporation field staff provides a tremendous amount of technical assistance in the development of those projects.
Another aspect is recruitment. VISTAs, whether they are recruited locally or from our national pool, are selected because they have the relevant skills they need to really carry out those assignments. The way we recruit is quite targeted.
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Training is definitely another aspect of it. We instill in our project sponsors from the very beginning the notion that VISTAs should create a sustainable outcome at the end of three, four, five years because we do turn our projects over after a few years.
Mr. WOFFORD. Could I add two other elements?
Mrs. LOWEY. I would be delighted.
SELECTION AND TRAINING OF VISTA'S
Mr. WOFFORD. One is that the projects themselves do the ultimate selection of the VISTAs. They vary in what their requirements are. But they find people who are natural-born leaders in one area or another, in many cases.
Secondly, the training that we do is very important, but in many, many cases the training that those local programs do is even more important. Take the 400-some AmeriCorps members in Habitat for Humanity. Some 200 of those are VISTAs.
Habitat is very interested in who it selects. They particularly like to select people who had been college volunteers or volunteers in high school before they became VISTAs or AmeriCorps members with Habitat.
Secondly, they get intense on-site training. When Speaker Gingrich and other members of Congress were building a house nearby here with the ''Houses that Congress Built''—a wonderful idea of Congress sponsoring Habitat houses—it was the AmeriCorps team that had organized the great part of the site, that was up on the scaffolding telling members of Congress what to do.
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In any of the Habitat blitzes, it is the AmeriCorps teams that go in. They are there at the beginning organizing it. They are there at the end of the day when the other volunteers have left. They are there first thing the next morning. And they have been trained.
I was in Americus, Georgia seeing it happen on a big blitz a year ago. They get that training with Habitat. We are operating on so many different fronts. That is just one example.
Mrs. LOWEY. Mr. Chairman, I know the bell went off, but I just want to conclude, if I may, in thanking you for another successful partnership in Westchester County with the Literacy Volunteers of Westchester County. It has been an outstanding partnership, and you have really had an impact in adult literacy. I personally want to thank you and wish you well in your continuing good work.
And thank you, Mr. Chairman.
Mr. WOFFORD. Thank you, Ms. Lowey.
Mr. CALDERA. Mr. Chairman, that is the same training point that applies to the literacy programs. The literacy programs do a great part of the training of the literacy VISTAs.
Mr. PORTER. Can I ask you two quick questions to end our hearing this morning? It has been estimated that 40 percent of fourth graders scored below the basic level on the 1994 National Assessment of Educational Progress. If the America Reads initiative is fully implemented, what is your goal and timetable for improving on this 40 percent figure? Can you really have a significant effect on achieving the goal of bringing that up?
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Mr. WOFFORD. Yes, but immediately we need to recognize that the challenge differs tremendously from school district to school district. For example Montana, just reported their test results. They showed that in Montana, 28 percent of the children going into the fourth grade were not able to read adequately.
That is much better than the national average, but there were districts in Montana, particularly associated with Native American on Indian populations and low-income populations, where 50–60 percent were not able to read. VISTAs assignment is to work in the low-income communities. So VISTA's will be working with tremendous dedication in this most difficult area.
I have just come back from a trip to such projects in eight states. And they are going to be able to prove progress school-by-school and neighborhood-by-neighborhood. I have seen a number of schools that have turned things around—where they have made extraordinary progress in the last one, two or three years. We have got a record of achievement on that.
The national progress is going to depend on resources far beyond us, however. As proud as we are of all of the things we are doing, this campaign for literacy is very widespread. Cities are organizing their campaigns in different ways. But yes, we will be able to show results school by school and neighborhood by neighborhood.
Mr. PORTER. Senator, AmeriCorps*VISTA is partnering with over 20 national organizations to make an impact on communities in the area of adult and children's literacy education, technology, housing, homelessness among a number of other issues.
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One of the organizations you work with is the Big Brothers/Big Sisters Program. How do you work with a program like this one? What do you actually do with them?
Mr. WOFFORD. One of the interesting things that we were doing about a year or so ago was helping Big Brothers/Big Sisters recruit, develop and organize high school students to become junior Big Brothers and Big Sisters for elementary school students. We have a new and very interesting program with Big Brothers/Big Sisters and I was lucky to go up and see their training at their sendoff program.
Maybe Diana London could just quickly tell you the details on that project.
Ms. LONDON. Yes. We are working with the national organization, but, actually, VISTAs are assigned to 25 or more local affiliates, including one in the metropolitan Chicago area. And the ojectives of the program are: to increase the number of minority mentors, to set up recruitment systems so that we can attract more minority mentors into the Big Brothers Program; to set up some school mentoring programs; and to try to target recruitment efforts toward corporate mentors and senior mentors. Each site will have one of those foci as part of their activities.
It is just getting off the ground. I think in Chicago VISTAs actually arrived within the last couple of weeks. It is a little bit too soon to be able to report on our progress. Next year when we come back, we will be able to tell you how it is going.
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Mr. PORTER. Thank you very much. Senator, thank you very much for a fine job you are doing with this agency. And I wish we had more time because there is so much breadth to it as well as depth.
Mr. WOFFORD. Well, I want to make you aware of the role of seniors in every one of the priorities that we have discussed. Also, we are combining senior RSVP and Foster Grandparents with VISTAs in many places very effectively.
Thank you very much.
Mr. PORTER. Thank you very much, sir.
The subcommittee will stand in recess until 2:00 p.m.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Tuesday, April 28, 1998.
OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION
WITNESSES
STUART E. WEISBERG, CHAIRMAN, OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION
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WILLIAM J. GAINER, EXECUTIVE DIRECTOR
Introduction of Witnesses
Mr. PORTER. The subcommittee will come to order. We continue our hearings on the budget for fiscal year 1999 with the Occupational Safety and Health Review Commission.
Mr. Weisberg, Stuart Weisberg, Chairman, will testify. Mr. Weisberg, we are pleased to have you with us today. I want to start by telling you that we appreciate the work you have done at the Commission. We appreciate your willingness to work with us to reduce costs, reevaluate your office structure, automate the agency, and become more productive and efficient. You have developed a very good strategic plan. You have received clean audits. You have invested in your employees. We also appreciate your efforts to make the appeals process more accessible to small employers by reducing the costs and legal hassles they have previously encountered.
We had the Federal Mediation and Conciliation Service before us last week and told their director, Dr. Wells, that we don't make enough effort to get the good stories about government into the media. Everyone knows about the $1,000 screwdriver, but when government gets it right, nobody hears about it. I believe your agency is getting it right and I hope that we can get the word out about it.
If you would introduce the gentleman who is with you and then proceed with your statement.
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Mr. WEISBERG. Thank you very much, Mr. Chairman. It is again a pleasure to appear before you to discuss our budget request. I am accompanied today by our Executive Director, William Gainer. Mr. Chairman, I have a prepared statement that I request be inserted in the record in its entirety.
Mr. PORTER. It will be received.
Opening Statement
Mr. WEISBERG. Let me highlight first what we have done to assist small employers. In October 1995, we launched E–Z Trial, a program which allows small employers to contest cases and appear before our judges with as little legal formality as possible. Almost 50 years ago, Congress passed the Administrative Procedures Act to govern administrative hearings. Congress believed that court proceedings were too cumbersome and time-consuming. Today many administrative hearings are as time-consuming and complex, if not more so, than court proceedings. E–Z Trial represents an attempt to get back to basics, to create a less formal user-friendly forum to adjudicate disputes.
The E–Z Trial program is working remarkably well. Not only are E–Z Trial cases being heard far more promptly and cycle time is being reduced dramatically by almost two-thirds but, most gratifying, far fewer cases are being dismissed based on technicalities.
What we learned from focus group meetings held earlier last year in Cleveland to evaluate the program was that even though we have a plain English guide to E–Z Trial, some small employers who had participated in an E–Z Trial were surprised to learn that it was a real trial with sworn witnesses. They had assumed it would be similar to an informal settlement conference at OSHA where everyone sits around the table.
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To fill this information gap, we recently produced a 27-minute film entitled E–Z Trial, ''The Case of the Missing Guardrails,'' to give small employers and others some understanding of what to expect in an E–Z Trial. This short film condenses and dramatizes an E–Z Trial based loosely on an actual case. We made this film informational as well as entertaining. Whenever a case is designated E–Z Trial, we send a free copy of the film on videotape to the small employer. The film is also shown at small business association meetings and conferences.
I am pleased to report that we were recently notified that our E–Z Trial program has won a Hammer Award from Vice President Gore's National Performance Review.
A major new initiative that we are undertaking involves settlements. Last month we published for comment in the Federal Register a proposal to create a mandatory settlement part for all cases involving proposed penalties of $200,000 or more. The purpose of this one-year trial pilot program is to facilitate the settlement process in some of the bigger, more complex cases, cases which are less likely to settle, cases which demand a great deal of time and impose a significant burden on Commission resources. There would be a mandatory in-person settlement conference with the settlement judge. Each party must have present an individual who has full authority to settle the case. If the case does not settle, a different judge will be assigned to hear and decide the case. It is our goal to settle enough of these big resource-intensive cases to justify the costs involved in providing a settlement judge and holding a formal settlement conference.
In April 1995, we made a deal with this subcommittee. We submitted a strategic plan which set ambitious goals and the subcommittee provided us with the funding needed to pursue those goals. Many of those original goals for improving Commission performance have been met and others have seen significant progress.
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With respect to our current strategic plan, we continue to be on track or ahead of schedule. Let me highlight some of the progress to date. We have reorganized our regional office structure, closing the Dallas office in 1996 and commencing plans to close the Boston office in fiscal 1999. We have successfully reduced our annual operating costs by more than $500,000. This will increase to $700,000 upon closing the Boston office. In fiscal 1997, we reduced the cycle time for cases going to trial before our judges from 520 to 335 days. We have set up a World Wide Web site which provides people with quick access to decisions, rules of procedure, press releases, Federal Register notices, et cetera. For example, my prepared testimony will be available on our Web page today. We have published and widely distributed two user-friendly guides for conventional as well as E–Z Trial procedures. We have obtained upgraded desk-top computers and software which fully meet the job needs of each employee. We also provide laptops for our judges.
We have in operation a comprehensive case tracking/management system. Over a three-year period, as a result of savings and vacancies, we expect to have returned more than $1 million to the Treasury.
The biggest problem that we are currently facing at the Review Commission, Mr. Chairman, is that we have not had a quorum, that is to say, two commissioners, since November 13 when Commissioner Dan Guttman's tenure as a recess appointee ended. I feel like I have been home alone now longer than Macaulay Culkin. It is extremely frustrating. Contested cases, petitions for interlocutory review, as well as pending cases, cannot be acted upon in the absence of a quorum. Nor can our new settlement program be implemented until we have a quorum.
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In my testimony last year I made reference to the Carpenters and their song, ''We've Only Just Begun.'' Today a more appropriate musical group would be Three Dog Night and the lyrics from one of their old songs which laments, ''One is the loneliest number of them all.''
Our ability to meet the case processing goals for our strategic plan is jeopardized by lack of a quorum. Part of the problem is that as an adjudicative agency, we do not have a natural constituency or an interest group pushing the White House or the Senate to act on appointments. Obviously something needs to be done. It is in the best interest of everyone—business, labor, and OSHA—to have a Review Commission that is operational and that has some continuity in its membership.
Thank you, Mr. Chairman. Mr. Gainer and I will be pleased to answer any questions you may have.
[The prepared statement follows:]
"The Official Committee record contains additional material here."
FINANCIAL AUDITS
Mr. PORTER. Thank you Mr. Weisberg. In October we received a copy of the audit of the OSHRC financial statements. Your auditor issued an unqualified opinion with no material weaknesses or reportable conditions. Obviously, we are pleased with the results. Has your fiscal year 1997 audit been completed?
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Mr. WEISBERG. No, Mr. Chairman. Because we are a small agency, we plan to do the financial audit every other year because of the significant cost involved.
COMMISSIONERS
Mr. PORTER. Mr. Weisberg, you have already reported improvement in your case processing times. We appreciate the progress you have made. However, you reported on two potential problems in your written statement. The first is Commission decisions. Obviously this is out of your control since you do not have a quorum. How did we get into this problem? How do you expect it to affect your fiscal year 1998 and fiscal year 1999 cycle times, and do you have any reason to believe this problem is going to be resolved any time soon?
Mr. WEISBERG. I think we got into this problem, Mr. Chairman, because since 1992, there has only been one Commissioner confirmed by the Senate: myself.
This problem is not a new problem. Let me read something that former Commissioner Buckley wrote 10 years ago in 1987: ''These are not normal circumstances for the Commission. We have lacked a full quorum since September of 1986, over 17 months. We have lacked a quorum to take official action since April 27, 1987 over 10 months. I am no longer optimistic that the Commission vacancies will be filled in the foreseeable future.
This is not a new problem, as we pointed out in our prepared statement. Since 1985, a period of almost 13 years, the Commission has been without a quorum for 27 months or roughly 17 percent of the time. During the past 13 years the agency has not had a full complement of three commissioners for more than 6 years, or 46 percent of the time.
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So it is a continuing problem. It is one that has been true in Democratic administrations and Republican administrations, Democratic Senates and Republican Senates. The impact it will have on the Commission is not only in meeting our strategic plan, but it will wreak havoc with our cycle times at the Commission level not just in the next year but in fiscal 1999 as well. When you add 6, potentially 9 months to each case, it is hard to decide that case in less than a year.
Mr. PORTER. Has the President sent up the names?
Mr. WEISBERG. No, the President has not sent up any names. Commissioner Guttman's name had gone up in 1996, I believe. And it was pending before the Senate and then, when the Senate recessed, his recess appointment ended. No new name has gone forth to the Senate.
Mr. PORTER. What can we do to help this? Can we write the White House and suggest they get on this, or is it a problem in the Senate with other appointments as well?
Mr. WEISBERG. It is unclear, Mr. Chairman, where the problem is. Obviously better communication between the White House and the Senate, I think, would help deal with this problem and resolve it.
ALJ PRODUCTIVITY
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Mr. PORTER. We are going to see what we can do to help. Obviously we do not want you to get behind in your cycle times when you are doing such a good job to get ahead.
Mr. Weisberg, the other area you flagged for us is ALJ decision times. The problem grows out of judicial vacancies and uncertainties you experienced in part because you were responding to this subcommittee's concern about the efficiency of your field structure. How do you expect your cycle times to be affected by this problem and when do you expect to see improvement?
Mr. WEISBERG. As I indicated in my statement, we had made significant progress in fiscal 1997 in reducing our cycle time for heard cases before our judges from 520 days to 335 days. So far this fiscal year, productivity by our judges is up. However as you pointed out, there has been some slippage in our cycle time in conventional cases so far in 1998.
Reasons are several. One, during most of last year we only had 12 judges because our first judge in Atlanta retired. It took us a little while to fill that position. Also a 14th judge slot was encumbered by pending MSPB action. The MSPB matter has been resolved. The MSPB reversed their administrative judge, ruled in our favor, so that position is no longer encumbered and we expect to fill that position in the next 30 days.
One other problem that we have noticed is with our South Pacific cases. As you know, OSHA and we have jurisdiction in Guam, Saipan, American Samoa, and the Swan Islands. What has typically happened is once a year we would send a judge out to hear those cases. Meanwhile those cases would sit around for almost a year. In some cases it has take more than a year to go to trial. We have a situation where a citation issues two months or three months before the judge is set to go out there and because of time for discovery in conventional proceedings it can be 15 months, 16 months before the case goes to trial.
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What we are planning to do this year is to try to send the judge out there every six months or twice a year to deal with those cases. We are also trying to provide more assistance to our judges, particularly in the big cases, by using law clerks or whatever to help them go through the record in writing the decisions. As you know, a lot of our cases now that we are seeing are the bigger, more complex cases.
E–Z TRIAL
Mr. PORTER. Mr. Weisberg, we are very interested in your E–Z Trial initiative here. Your GPRA plan sets goals for fiscal year 1999 and beyond of 160-day average disposition time for the 30 percent of cases that you anticipate will qualify for E–Z Trial. How does this cycle time compare to non E–Z Trial cases.
Mr. WEISBERG. It is almost two-thirds less. I think it is roughly 423 days compared to the 160 days it takes to get a decision in an E–Z Trial case.
Mr. PORTER. Do you anticipate any increases in caseload now that you have streamlined the appeals process for many cases?
Mr. WEISBERG. What we have found is that a slightly larger percentage of E–Z trial cases are going to hearing. From my perspective, that is good. That was one of the purposes for creating E–Z Trial, to give the small employer his or her day in court. They seem to be availing themselves of that opportunity.
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Mr. PORTER. Do you think 30 percent and 160 days are about as far as you can push E–Z Trial?
Mr. WEISBERG. I think 160 days is about as far as we can push E–Z Trial, noting that E–Z Trial cases that settle do so significantly faster than conventional cases as well. On the 30 percent, that really depends on our other caseload.
Mr. PORTER. What responses are you getting to E–Z Trial both from DOL and from employers?
Mr. WEISBERG. The response from the employer community has been extremely positive. As you know, we had some focus groups on E–Z Trial, met with people who had participated in the E–Z Trial process. They were quite pleased with E–Z Trial and how it works and its objectives. From the Labor Department, as you may recall, when we first proposed E–Z Trial, the Labor Department opposed it. And most of their fears and concerns have not come to pass. What I have heard from people in the field is basically the sun still comes out tomorrow. It has not meant the end of their ability to try cases and so on.
Mr. PORTER. How many of the videotapes have you sent?
Mr. WEISBERG. We have sent roughly, I think, about 250 videotapes. We don't send it to people who are represented by attorneys. We just send it to small pro se employers.
NEWS STORY
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Mr. PORTER. I started out by saying that we need to get the story out about the successes in government. Last year your story got out. Unfortunately, the columnist who published the story managed to get most of the facts wrong. He somehow managed to turn a great success story into a boondoggle. I know you have responded to the article but I wanted to get some of this on the record.
I would like to ask you if some of the assertions and implications in the article are factually correct. Can you just answer yes or no to most of these questions, please? The article states, ''Weisberg insisted on remodeling his office with fashionable new furniture at the same time as his agency is laying off employees.'' Have you done any remodeling of your offices?
Mr. WEISBERG. No, Mr. Chairman; not one nickel has been spent remodeling my office. No furniture was replaced. Nothing was painted, no recarpeting was done. My office is the same as it was four years ago when I moved in, with one notable exception. When I moved in there was a large TV set in the office, which I had removed the first day on the job. I felt that my job was to decide workplace safety and health cases, not to watch television, and we subsequently canceled the cable service that it was attached to.
Mr. PORTER. Have you laid off any employees?
Mr. WEISBERG. We have not laid off a single employee. When we had our reorganization, we gave every employee an opportunity to transfer to another region with us paying the travel expenses.
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Mr. PORTER. Do you have a regional office in Dallas?
Mr. WEISBERG. We no longer have an office in Dallas.
Mr. PORTER. Did you refurbish the Boston office after the agency decided to close it?
Mr. WEISBERG. No, we did not. If I could spend about 60 seconds responding to that, because I think that is an important point. In 1995, before we considered closing the Boston office, we took certain steps. The reason for that, when I went to the office there were electrical hazards. There was exposed wiring, there were tripping hazards. We could have been cited by OSHA. What we did, we spent a total of $5,000, basically removing two walls, moving the two walls. That enabled us to then give back space to GSA. We were able to reduce, for that $5,000, we were able to reduce our rent from roughly $110,000 to $45,000.
Mr. PORTER. So your rent has actually gone down, not up.
Mr. WEISBERG. Yes.
Mr. PORTER. Have your administrative rates for local calls, long distance, mail transcription, supplies, equipment, maintenance and travel, gone up or down during your tenure?
Mr. WEISBERG. It has gone significantly down.
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Mr. PORTER. Have you returned funding to the Treasury for four years running?
Mr. WEISBERG. That is correct.
Mr. PORTER. Mr. Weisberg, you are not the only one who is mad about this article. The columnist closes by saying that ''excessive spending under the $1 billion mark doesn't even register on the radar screen as far as the Committee on Appropriations is concerned.'' The columnist has not bothered to attend a single one of the 1,200 agency hearings conducted by the subcommittee since I have been a member of it. He certainly has not attended any of the 300 agency hearings I have held since I became Chairman of this subcommittee in 1995. If he had, he would not have made such absurd statements.
Mr. Weisberg, please insert in the record at this point your response to the column and any other written comment you would like to make.
[The information follows:]
"The Official Committee record contains additional material here."
BUDGET REQUEST
Mr. PORTER. Mr. Weisberg, other than for pay and benefits, are you requesting any increase in this budget?
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Mr. WEISBERG. No, we are not.
CASE TRACKING
Mr. PORTER. Is your case tracking system fully automated, and how do you use it to improve your productivity?
Mr. WEISBERG. It is fully automated, Mr. Chairman. And what we do with it, not only can we track judges' cases but also at the Commission level we are able to enter key dates in the system. When a case comes in, attorneys are given time targets for different phases of the case processing system, and we are able to track that on our system to see when an attorney is behind and to see that the time targets are being met throughout the process.
FINANCIAL MANAGEMENT SYSTEM
Mr. PORTER. When will your financial management system be fully automated?
Mr. WEISBERG. We expect it to be fully automated and on line by the end of this year.
YEAR 2000 COMPLIANCE
Mr. PORTER. You are making greater use of electronic communication internally and externally. What is the status of your Year 2000 compliance effort?
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Mr. WEISBERG. We have no Year 2000 problem.
WEB SITE
Mr. PORTER. That is good news. How have the public and your customers responded to the availability of your information on line? Do you track Web site usage?
Mr. WEISBERG. We do, based on the first two months of tracking results. I believe there are approximately 17,000 hits per month.
ALJ CASE DISPOSITIONS
Mr. PORTER. You testified that judicial case dispositions are up 20 percent in 1998 and the number of cases being decided is up 30 percent. What is the distinction between these two statistics and to what do you attribute the increase?
Mr. WEISBERG. The first refers to judicial dispositions. That includes cases that have not gone to hearing where a judge might be involved in the settlement, the case settles. That is a disposition of the case. The latter figure refers to tried cases, cases that go to hearing and decisions are issued. To the first it goes to larger caseload. As we predicted last year, there was a 400-case increase and we expect a similar 400 case increase this year. The latter goes to more productivity by our judges.
Mr. PORTER. Thank you Mr. Weisberg. Ms. Pelosi.
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YEAR 2000 COMPLIANCE
Ms. PELOSI. Thank you, Mr. Chairman. I really do not have any questions for Mr. Weisberg. I welcome him here. I served on the Subcommittee on Government Operations, on Employment and Housing, which Mr. Weisberg staffed. He was our chief staff person for many years and I know firsthand his commitment to the issues under his jurisdiction now. I did not come with any questions but I would be interested in knowing how you solved your Year 2000 problem because you stand out as a success—many others still do have the problem. Is there something we can learn?
Mr. WEISBERG. To plan ahead. We started looking at that in 1994. When we started upgrading our computer system and replacing the old computers, we dealt with it at that point at that time. So by planning ahead, we were able to avoid having to deal with the problem in the Year 2000.
Ms. PELOSI. Do you think it is too late for others who have not gotten a jump on the Year 2000? I think some are just starting now, in February.
Mr. WEISBERG. I will ask my Executive Director to talk about the computers. I am someone to whom my 8-year-old explains, ''Dad, this is how you use the mouse.''
Mr. GAINER. At the risk of bursting our bubble a little bit, we have a much easier problem than a lot of the other agencies. We have had the fortune to be able to replace all our key systems in the last four years, and we had a very good IRM manager on staff who knew instinctively that you do not create those kinds of problems. I think we would have to attribute it to the fact that we have a smaller problem and we had very good people involved in it.
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Ms. PELOSI. Do not underestimate what might be useful information for others on this issue because we just heard a talk from Andy Grove last week under the auspices of the John Quincy Adams Society and our colleague Amo Houghton. This became a subject of discussion on everything from microwave ovens—that would be the least of it—to very important information for the American people.
I have not heard anybody say with such confidence that they were on top of the Year 2000 challenge. We thank you for your good work.
Mr. PORTER. Mr. Weisberg, in our judgment you are one of the two best agencies that we have the pleasure of dealing with and you are doing a wonderful job. We very much appreciate it. Thank you for being here today.
The subcommittee will stand briefly in recess.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Thursday, April 23, 1998.
FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION
WITNESS
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MARY LU JORDAN, CHAIRMAN
Mr. PORTER. The subcommittee will come to order. We continue our hearings on the budgets of the Agencies under our jurisdiction, with the Federal Mine Safety and Health Review Commission, and we are happy to welcome Mary Lu Jordan, the Chairman of the Commission. Ms. Jordan, if you would introduce the people that you have brought with you, and please then proceed with your statement.
Introduction of Witnesses
Ms. JORDAN. Good afternoon, and thank you, Mr. Chairman. On my left is the General Counsel, Norm Gleichman; on my immediate right is our Executive Director, Dick Baker; and to his right is our Chief Judge, Paul Merlin.
Opening Statement
It is a pleasure to appear before this committee and to discuss with you the Federal Mine Safety and Health Review Commission's Fiscal Year 1999 budget request, its accomplishments, and ongoing activities.
The Federal Mine Safety and Health Review Commission is an independent, adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Federal Mine Safety and Health Act of 1977. Most cases deal with civil penalties assessed by the Department of Labor's Mine Safety and Health Administration, MSHA, against mine operators and address whether the alleged violations occurred, as well as the appropriateness of proposed penalties. Other types of cases address closure orders, miners' complaints of safety-related discrimination, and miners' requests for compensation after having been idled by a mine closure order.
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The Commission's Administrative Law Judges decide cases at the trial level. The five-member Commission provides administrative appellate review. The Commission reviews decisions made by its ALJs, rules on petitions for discretionary review, and may on its own initiative direct cases for review that may be contrary to law or policy or that present novel questions of policy. An ALJ's decision that is not directed for review becomes a final, non-precedential order of the Commission. The Commission's decisions are precedential and many involve issues of first impression under the Mine Act. Appeals from the Commission's decisions are to the U.S. Court of Appeals.
Currently, the Commission has its full complement of five members.
The budget request for Fiscal Year 1999 is a ''no increase'' budget totaling $6,060,000. It contains funding for 54 FTEs, a reduction of three FTEs below the Fiscal Year 1998 level. Funding from the FTE reduction will be used mainly to offset the added cost associated with federal pay increases.
The Commission proposes to continue to reduce its inventory of undecided cases at both the trial and appellate levels during all three years covered by this budget submission. The reduction in inventory is being achieved as a result of a number of factors which include a reduction in contests of MSHA citations and orders; a redistribution of existing Commission resources in Fiscal Year 1996 which strengthened the Office of General Counsel; and the development of a strategic plan and annual performance plans containing goals for increasing productivity in case dispositions and appellate review, while at the same time reducing personnel as part of the Administration's streamlining objective.
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As of March 31, 1998, the Commission has a trial docket of 5,093 undecided cases, having received 866 cases and decided 801 cases this fiscal year. At the trial level, 2,000 new cases are anticipated for Fiscal Year 1998 and 2,200 are expected in Fiscal Year 1999. Dispositions are expected to total 2,900 in Fiscal Year 1998. In Fiscal Year 1997 the Commission Judges received 1,799 new cases and disposed of 2,776. Five thousand one hundred dispositions are anticipated in Fiscal Year 1999. This high level of dispositions is predicated on the assumption that the Court of Appeals will issue its decision in Secretary of Labor v. Keystone Coal Mining Corporation, known as the ''dust cases''. We anticipate that once the Court of Appeals has ruled, most of the remaining dust cases which have been on stay since Fiscal Year 1991 will be decided. As a result, the Commission anticipates reducing its inventory of undecided cases to 1,228 by September 30, 1999.
At the review level, the Commission has a current docket as of March 31, 1998, of 47 cases, having received 15 cases and disposed of 21 cases so far this fiscal year. The average age of the 47 cases pending is 8.4 months. The Commission anticipates ending Fiscal Year 1998 with about 38 undecided cases on hand. In Fiscal Year 1999 it anticipates having only 10 cases undecided. This would be the lowest inventory of undecided cases in the history of the Commission, and is premised on the disposition of 13 matters, currently on stay that are related to the dust cases.
Fiscal Year 1997 was the initial year of our Government Performance and Results Act Strategic Plan, and I am proud of our accomplishments.
At the Commission level, we decided 8 out of 9 cases that reached more than 24 months of age during the fiscal year. We reduced our briefed but unassigned cases from 12 to 9. We reduced the average age of substantive decisions issued by 1.4 months, and maintained a ten-year cumulative affirmance rate of about 80 percent.
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At the trial level, we reduced the number of undecided cases that were between 9 and 17 months of age from 37 to 14, a reduction of 62 percent; reduced the number of days between receipt of a case to its assignment to an ALJ from 82 days to 70 days; 93 percent of the settlement approvals were within 30 days of receipt of the settlement motion by the parties; in cases requiring a hearing, a decision was issued within 90 days of receipt of the post-hearing brief in 97 percent of the cases.
We have set equally ambitious goals for ourselves in Fiscal Years 1998 and 1999. We will do our best to achieve those goals, notwithstanding our leaner staffing and flat budget.
Thank you for the opportunity to present this budget summary, and I would be pleased to respond to any questions you may have.
[The prepared statement follows:]
"The Official Committee record contains additional material here."
DUST CASES
Mr. PORTER. Thank you, Ms. Jordan. I am going to try to see if I understand this correctly, but there are a large number of dust cases that have been consolidated, and I understand oral arguments were to take place in the Court of Appeals last Monday?
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Ms. JORDAN. Yes.
Mr. PORTER. Did that happen?
Ms. JORDAN. Yes, it did.
Mr. PORTER. Is it correct that there are 3700 cases that will be decided, later this year, by the Court of Appeals?
Ms. JORDAN. The Court of Appeals does not have 3700 cases on its docket.
Mr. PORTER. They do not.
Ms. JORDAN. They have a lead case. They have like a one——
Mr. PORTER. One case representing——
Ms. JORDAN. Yes, a representative——
Mr. PORTER. But it presumably will affect the outcome of most of the other cases?
Ms. JORDAN. Yes. Exactly how it affects the other cases will depend on the nature of the Court's decision.
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Mr. PORTER. How many cases are there in total that you have awaiting the disposition or the decision in that case?
Ms. JORDAN. About 3700.
Mr. PORTER. That is the 3700.
Ms. JORDAN. At the trial level. We have on the appeal level 13 cases that are related to the certification of people who took dust samples, not citations for violations—they are a little bit different—but they are also connected. We suspect, and presume, that they are going to be released from stay and dealt with after the Court of Appeals decision comes out.
Mr. PORTER. So, if I understand what you said correctly, when the Court of Appeals decision is made, that presumably is going to clear a lot of your backlog from your docket, of course.
Ms. JORDAN. Presumably. There is, a worst-case scenario but we do not expect that. It is conceivable that the Court of Appeals, in its decision, could reverse every aspect of the Commission's case, in which case the Secretary could proceed to prosecute each one of the cases that it had cited. That is the worst-case scenario. I suspect that that is unlikely. I think that there would still be cases carved out, or grouped, or consolidated.
Mr. PORTER. What was your initial finding in the case that is on appeal?
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Ms. JORDAN. Well, I was personally recused when the Commission decided the case, but the decision of the Commission was to affirm the decision of the Administrative Law Judge who vacated the citations. He found that the Secretary had not proven that the abnormal white center that was shown on the cassettes, was accomplished through tampering. The judge determined that the evidence had shown that there were other potential ways that the white centers could have been formed and, therefore, he vacated those citations.
Mr. PORTER. Is it correct that all 3700 cases are about the same basic subject?
Ms. JORDAN. They all involved the abnormal white center which was found on the cassette, which the Secretary then alleged was the result of tampering. I should clarify that there was one lead case that set certain standards for burden of proof and certain scientific theories.
Then there was the Keystone case itself, which focused on the actual handling of the cassettes at that mine and how they were processed, because there was some question about whether the handling, the way it was done at that mine, resulted in the abnormal white center. There is a scenario that could occur where some of the underlying legal rulings are upheld, but yet there is enough question remaining on the evidence associated with the Keystone Mine that could be reversed. It would be up to the parties to assess whether their handling—and the Secretary to assess—whether the handling procedures at the other mines are so different that they might prevail in those cases. So they are related.
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There are ways that could still lead to litigation, which leaves us trying to assume how we should be prepared for the court's decision. We want to, even in the worst-case scenario, be able to process the cases as quickly as possible.
Mr. PORTER. My recollection is that these incidents that gave rise to these cases first occurred when Lynn Martin was Secretary of Labor. Is that about the right time frame?
Ms. JORDAN. Yes, I believe that is correct.
Mr. PORTER. Maybe ten years ago, or almost ten years ago?
Ms. JORDAN. Judge Merlin, do you remember when the cases went to trial?
Mr. MERLIN. That was the early '90s.
Mr. PORTER. It is eight years ago, at least. It has been quite a long time.
GPRA PERFORMANCE PLAN
Ms. Jordan, I want to congratulate you on your GPRA performance plan. You have provided both a baseline and a specific numerical goal for your activities. For example, you indicate that you plan to reduce by 25 percent the number of pending cases that have an age of between 9 and 17 months from assignment. Your goals are measurable. They deal directly with Agency performance, and they set a future goal that we can hold you accountable for.
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One of your performance goals for Fiscal Year 1999 is that you will reduce the average length of time it takes to reach a decision from 17.9 months in Fiscal Year 1997 to 15.4 months in Fiscal Year 1999. What is enabling you to accomplish this? Do you believe that GPRA has contributed to improving your Agency's productivity?
Ms. JORDAN. It has. It has forced us to focus on some concrete goals where we can look at and measure ourselves. So far in 1998, we have continued to reduce the gap between performance and the goals, but the goals are ones that tend to be a little bit slippery. Cases in one category, you decide them and some other cases move into an older category. But we are learning how to watch these measurements. We now have the General Counsel provide reports in a format that takes into account the GPRA measurements. The same with the Chief Administrative Law Judge. We did not have that before. We had different ways of looking at how many cases were proceeding, but we did not have some of these concrete measurements.
Mr. PORTER. You have one case pending that is older than 24 months, that prevented you from getting 100 percent of cases within that. What kind of case is that? That is not a dust case?
Ms. JORDAN. No, it is not a dust case. It is probably a case that has looked fairly straightforward, and then as we delved into it—you know, some cases are like an onion. They may not look that complicated on the outside. You start getting into it, layers start forming and people have differing views, it becomes difficult to issue the decision if there are too many separate views. It takes more time to try and see if we can consolidate into more of a majority opinion.
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We were in a period of time when there were four Commissioners last year, which made it difficult sometimes to get cases totally resolved.
STAFFING DECLINE
Mr. PORTER. You are seeking a no-increase budget, and it contains funding for 54 FTEs, a reduction of 3 below last year's level. Last year you also reduced the FTE level by 2. Is this a trend that you anticipate will continue?
Ms. JORDAN. It could. We could see further reductions. For instance, this year we are authorized to have 12 Administrative Law Judges, but we currently have 10. We have proposed to reduce our authorization of Administrative Law Judges in our proposed budget to 11 because we still need to see what happens with the court's resolution of the dust cases. We think we may need that manpower for the dust cases, but if case intake continues to decline, it is conceivable we could see additional reductions in future budgets. It really depends on what happens with the case intake, which is a bit out of our control. It depends on what the enforcement agency does and, if they come up with an enforcement policy or strategy that tends to generate a lot of controversial litigation, then we have to deal with that.
Mr. PORTER. Thank you, Ms. Jordan.
Ms. Northup.
REDEFINING SIGNIFICANT AND SUBSTANTIAL
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Ms. NORTHUP. Thank you, Mr. Chairman. Ms. Jordan, I have several questions, and I apologize for being late. I am interested in the significant/substantial definition. During the MSHA hearings, that question was asked of Secretary McAteer about his decision to challenge the definition of significant/substantial which he proposed in February, contrary to the reason that was established in the National Gypsum decision and was codified by him in 1992, and I understand that he has just withdrawn in his bulletin. He did not address whether or not he was going to seek to alter the significant/substantial definition through litigation. Do you anticipate the Commission will continue to maintain its long-term definition of significant/substantial?
Ms. JORDAN. We have cases that raise the significant/substantial issue that come before us. At times, a feature of it gets raised that may cause a Commissioner at any point in time to consider whether there is a way to change the definition or improve it.
One of the Commissioners has issued an opinion where he has expressed a concern that he thinks the current definition is perhaps not offering as much clarity as is possible for the parties, and that perhaps it is generating too much litigation, but that is hard to predict.
There is one case that is currently pending at the trial level that the Secretary had indicated that they were going to use as a vehicle for proposing an alternative definition of the S&S standard. Now, they have removed their Federal Register Notice, but that case, as far as I know, is still in our docket. Whether they will move to take a different litigation stance in that case remains to be seen, but we tend at the Commission to take what comes before us. If the parties present a case to us and argue for a different or alternative interpretation, we would certainly address that issue.
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Ms. NORTHUP. Well, the fact that it has been long-standing and it was codified by MSHA in 1982, then it seems to me to change it would be necessary to go through the rulemaking process again.
Ms. JORDAN. For the Secretary, the codification is in how they assess their penalties and how they assess penalties for gravity, and they have codified—the regulation does track the language of the Commission's decision, or the Mathies decision, as we call it.
For the Commission to depart from its precedent doesn't require a rulemaking. It would require, of course, explanation and rationale, as any court would have to do if they are not going by stare decisis, not following their precedent.
Ms. NORTHUP. Could I ask you—I think that you and Mr. McAteer did—were co-counsel in a case where you argued against the significant/substantial definition in 1989? I'm thinking of the Coal Employment Project v. Dole.
Ms. JORDAN. I believe that we may have been on that case together. I do not think that case involved the significant/substantial definition, actually. I think that case involved the challenge to the Secretary's policy of using a flat penalty for any cases that were not designated S&S, significant/substantial. I do not think it challenged the underlying definition that was used; the standard that was used. But in light of the statutory requirement, the case questioned whether they could, one, impose a flat penalty instead of taking the six statutory criteria into effect and, two, at that time the Secretary's policy was for any case that was not designated S&S, it did not show up in the operator's history of violations. One of the criteria for assessing a penalty is to look at the operator's history. So there was sort of a problem there. You could have an operator that had numerous violations that had not been designated S&S, then getting a violation down the road on a standard that was S&S, and when one looked at their history to assess the penalty and go by the statute, it was warped.
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The Court of Appeals did agree that removing the violation from the history was in direct contradiction to the requirement of the penalty criteria, but that to impose just a flat penalty was okay with the statute.
Ms. NORTHUP. Well, it certainly raised the question of whether you had feelings or a commitment that maybe the significant/substantial definition should be changed.
Ms. JORDAN. In my prior practice, I had occasion to argue many cases both utilizing the Commission's standard—actually, most of them did—utilize the Commission's standard. And in my current position, I am well aware that I would be looking at it as an impartial adjudicator, and just assessing the parties' arguments on the rationale of what would be an appropriate standard, whether it should be changed; if so, why; if not, why not.
Ms. NORTHUP. Well, I also want to echo the Chairman's comments. It is not often that we are lucky enough to have an Agency come before us that sounds to be so efficient. You know, most of what we get is ''We need more money'', and things get more bogged rather than less bogged down, it seems like. You know, that process is very efficient in your office, and I really appreciate it.
Ms. JORDAN. Thank you, I appreciate it. I have to really thank my colleagues here at the table with me who are very efficient and we benefit from their long experience actually in the Government and at the Agency.
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Ms. NORTHUP. Thank you, Mr. Chairman.
SUA SPONTE CASES
Mr. PORTER. Thank you, Ms. Northup. Ms. Jordan, in addition to the Commission providing administrative appellate review and reviewing decisions issued by Administrative Law Judges, the Commission may on its own initiative direct cases for review. How often does the Commission direct cases for review?
Ms. JORDAN. That happens rarely.
Mr. PORTER. What kind of case would be a candidate?
Ms. JORDAN. It would have to be something that would just be a very novel issue, one that in our reading of the Administrative Law Judge's decision he had really missed the boat. Usually what happens, we do review the Judge's decision and sometimes we see a case that we think might be a candidate for directing review, but then we may wait to see if a party will petition for review. That frequently happens, and we do not have the need to direct it ourselves.
Mr. PORTER. So there are none of those kinds of cases around at the moment?
Ms. JORDAN. I will let the General Counsel answer.
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Mr. GLEICHMAN. We do have a couple of cases in that category pending.
Mr. PORTER. And what kind of cases would those be? Is there any common thread?
Mr. GLEICHMAN. No, there is not a common thread. One is a discrimination case. One is a case involving relationship between two special findings, S&S which we've talked about already, and unwarrantable failure which is another special finding under the Mine Act. I think those may be the only two cases pending that the Commission directed for review.
WORKLOAD TRENDS
Mr. PORTER. Thank you. In last year's hearing, Ms. Jordan, you anticipated that the 14 new regulations projected to be finalized by the Mine Safety and Health Administration during Fiscal Years 1997 and 1998 would result in increased case filings. Have you found this to be the case?
Ms. JORDAN. I will let the Executive Director respond to those numbers.
Mr. BAKER. No, we have not so far, Mr. Chairman. Our case load is continuing to be at the level of last year, so there has not been the uptake that we anticipated. We have, in the last month, seen some movements, and we think that our estimate of 2,000 cases will be pretty accurate by the end of the year.
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YEAR 2000 COMPLIANCE
Mr. PORTER. Speaking of 2000, Fiscal Year 2000, are you going to have a problem?
Mr. BAKER. No, we will not have a problem. We did two small studies in 1997 and issues a contract in 1997 to do our Y2K work to have our programs corrected. We are basically on target with that. We would expect to have those problems corrected by the end of Fiscal Year 1998, so we have another year and a half to continue to work if anything came up. We feel we are in good shape on that issue.
Mr. PORTER. Thank you, Mr. Baker. Ms. Jordan, you and your team are doing a fine job, thank you very much. Thank you for appearing today.
Ms. JORDAN. Thank you, Mr. Chairman, we appreciate your comments.
Mr. PORTER. The subcommittee will stand briefly in recess.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Thursday, April 23, 1998.
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FEDERAL MEDIATION AND CONCILIATION SERVICE
WITNESSES
JOHN CALHOUN WELLS, DIRECTOR
C. RICHARD BARNES, DEPUTY DIRECTOR FOR FIELD OPERATIONS
VELLA M. TRAYNHAM, DEPUTY DIRECTOR FOR NATIONAL OFFICE OPERATIONS
FRANCES L. LEONARD, DIRECTOR OF BUDGET AND FINANCE OFFICE
Mr. PORTER. The Subcommittee will come to order. We continue our hearings on the Fiscal Year 1999 budget. We will begin with the Federal Mediation and Conciliation Service. And we are most pleased to welcome our colleague from Kentucky, Representative Hal Rogers, for an opening statement.
Introduction of Witness
Mr. ROGERS. I thank you, Mr. Chairman. It is always a pleasure being before your Subcommittee, especially you as Chairman. It has become quite a tradition for me, and it is a tradition I am quite fond of. For the fourth time, I would like to introduce to you a fellow Kentuckian from Floyd County, in my district, a very dear friend, John Calhoun Wells.
He did his undergraduate work at the University of Kentucky. And then after that, he did postgraduate work at Rutgers, was a senior research fellow at the John F. Kennedy School at Harvard. He has written numerous articles and other publications on labor and management.
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He later became Kentucky's first Secretary of Labor under the administrations of both Governors John Y. Brown and Martha Layne Collins. And while he currently serves as the Director of the Federal Mediation and Conciliation Service, this is actually his second tour of duty in Washington. He handled labor and economic policy under Senator Ford.
It has been an exciting year for the FMCS. They were the lead negotiator for the UPS strike, as we recollect. And knowing John, it is of little surprise that he was able to step in and negotiate a settlement as effectively in that case as he did.
Mr. Chairman, this is a bittersweet occasion. It is the last time I will have the opportunity to introduce him to you in this capacity, because John has decided to step down as Director of the FMCS and hang his shingle as a private consultant. And, judging from his past, I am confident that he will encounter nothing but success in his future. But it is bittersweet for us because he has been such an effective leader of this very important organization, now going on five years. And I count it a personal privilege to introduce him, present him to you another time.
Mr. Chairman, let me say thank you also for the effective way in which you have funded this organization. At the request of myself and John and his staff, this organization has done well under his leadership and the Chairman has done well in providing adequate funding for the organization that has allowed him to modernize an organization that needed some introductions into the 20th Century.
Mr. Chairman, thank you for letting me be here. And I am honored and pleased to present to you my friend, John Calhoun Wells.
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Congressman Porter's Opening Statement
Mr. PORTER. Dr. Wells, when you have somebody like Hal Rogers on your side urging more resources for your work, you are in awfully good shape, and we have been pleased to be very supportive.
I want to welcome you and your wife here today. I have been on this Subcommittee since 1981, which is a pretty long time. I have listened to hundreds, maybe thousands of witnesses. You are a person who knows how to get things done. And we appreciate it. Anyone familiar with the Caterpillar strike would understand that. We very much appreciate your service to our country. And obviously we are very, very sorry to be losing you.
Before we get started, I want to talk just briefly about something we touched on last year, and that is leadership. We all understand the difficulties that anyone in a leadership position faces in trying to bring about change. It is particularly difficult when you are trying to change government to make it work better for people. You are someone who has done that. You are someone who has made a true difference.
Last year I asked you to do two things if you decided to leave FMCS. One is to take an active role in choosing a successor. The other is to institutionalize to the greatest extent possible the new direction and changes that you have made during your tenure. We want the agency to keep moving forward after your departure, and you told us then how you are intending to do that.
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I would ask in your statement if you can touch on whether the White House has asked for your input regarding a successor and have you given them the benefit of counsel as to the future direction of your agency.
Please proceed.
Introductory Remarks
Dr. WELLS. Thank you very much, Mr. Chairman.
Before I respond formally, if I might, I want to say something to my dear friend and my Congressman from Eastern Kentucky, Congressman Rogers. Hal rearranged his schedule. He postponed his own hearing today so that he could be here with us this morning to introduce me once again.
I think I can say it best by telling you that our part of the world is blessed with great natural resources, magnificent repositories of coal, significant deposits of natural gas and petroleum. Our mountains are cloaked with wonderful hardwood trees. But perhaps the greatest natural resource is the leadership that we have in Hal Rogers.
He is one of our most magnificent native sons. And he is not only my dear personal friend, but he has provided enormous leadership to the people of Eastern Kentucky, sufficient so that the Democrats do not even field an opponent. Hal does not even run opposed. He has bipartisan support.
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And he has been my friend. I know he is your dear friend. And I just want to thank him once again for his friendship and all he has done to help me succeed. Thank you, Hal.
Mr. ROGERS. Thank you. Thank you, Mr. Chairman.
Dr. WELLS. Mr. Chairman, let me first, if I might, introduce the members of my staff who are accompanying me today. To my far right is Vella Traynham, who is our Deputy Director for National Office Operations. To my immediate right is Fran Leonard, who is our Budget and Finance Director. To my left is Richard Barnes, our Deputy Director for Field Operations. We have tried to do things in a team-based management system at FMCS.
You were kind enough to recognize my wife, Charissa, and I thank you for that kindness. I am very proud that she came with me to be here this morning.
This is, in fact, my last appearance before your Subcommittee as Director of FMCS. About four and a half weeks ago, I announced to the President, and then publicly, my intention to take leave of the office in a very short period of time.
Actually, one thing I wanted to get done before I left—two things—I wanted to help finish the Caterpillar conflict. And thank God that has now been resolved. And I will talk about that in a moment.
But, secondly and quite personally, I wanted to appear before you one last time and to look you square in the eye and tell you thank you, Chairman Porter, for your leadership in listening to us, being sensitive to our needs, and within the constraints with which you have to deal, to try to be helpful to us in our efforts to modernize this agency and bring it forward into the 21st Century. And that is something I wanted very much to do. And that is one reason I am still here, quite frankly.
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My job is largely done in terms of the strategic redirection of FMCS. I want to submit my testimony for the record and summarize it for you, if I may.
Opening Statement
We have attempted, quite frankly, and I think with some measure of success to transform FMCS into a customer-focused, performance-based organization that has as its staff 360-degree mediators. And that means mediators who are able to provide the full range of services which we offer to the American people in our nation's business and labor communities. And we have as our goal to be at least the equal of the best in the private sector. That, sir, has been the vision which has driven the changes within this organization.
We have gone with the conceptual framework that the workplaces of America, where products are produced and where services are conceptualized and delivered, really is the foundation, the building block, if you will, of the American economy. And if we at FMCS can improve the social relationship between workers and those for whom they work, between their unions and employers, then that will translate into enormous economic implications and gains.
It would drive competitive factors, like improved quality, productivity, customer satisfaction, more rigorous cost efficiencies, which together translates into profits. Profits, in turn, lead to jobs and new job opportunities and employment security in a growing economy, a strengthened ability for us to compete worldwide. That really is the framework, conceptual framework, that has driven all that we have done.
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ACCOMPLISHMENTS
Now, what have we done? Well, we have tried to listen to the marketplace. And we began with that premise. And we conducted, with your support for additional money, the first ever national customer service survey, designed by the Sloan School of Management at MIT. We held focus groups with our customers. We have now internalized the requirement that our mediators and our senior staff in the field meet with customers.
From that have emanated changes, for example, for a more demanding hiring criteria and more rigorous selection of our mediators, which has brought us to the recruitment and, really, the promotion of our higher qualified workforce, also, I must say, a more diverse workforce.
In all due respect, most folks who work for FMCS generally look like you and me. We have said that the American workforce is a little different than that. And so we have been very sensitive to issues of gender, of race, of ethnicity, and also of age.
We have raised the bar appreciably on our performance appraisal system. We reward high performance. And there is accountability for the lack of performance.
We have restructured and redefined our field operations, trimming it from 9 districts to 5 regions, 18 supervisors to 15, and redefined the leadership roles of our managers. We made a major investment in the education and training of our employees.
You might recall when I first appeared before you, we had not a single dollar in our budget for the education and training of our staff. And with the generosity of this subommittee, we now have three percent of our budget focused on training our people.
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We have upgraded our technology. Congressman Rogers made note of that. We had only 25 percent of our people who had access to computers. Twenty-three of our 79 field offices had fax machines; no e-mail; no integration.
Today, because of the support of this Subcommittee, everyone has computers. Everyone is on e-mail. There are fax machines in all offices. And our systems are reasonably well-integrated.
Based on these changes, this reinvention or reengineering, the Vice President was kind enough, through his National Performance Review, to recognize and reward us with the Hammer Award.
I want to tell you, these changes have included wide involvement of our employees. Forty-five percent of all our employees have served on 19 different task forces and committees. So we have tried, to the extent possible, to get wide support from within. But I guess what I am most proud of is we have had the support of the administration, of this Congress, both Republican and Democrat alike, and of our customers: business and industry, unions, and academic institutions with whom we operate.
So, that is a sense of what we have sought to do. Very briefly, you know the basic facts about us. We are an independent agency going back to 1947 from Taft-Hartley amendments. We have no regulations to enforce. We provide a voluntary service.
MEDIATION ACTIVITY
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We have five principal services. The first is dispute resolution, which is contract bargaining. Congressman Rogers mentioned UPS. You mentioned Caterpillar.
The Caterpillar strike in many ways for me personally was the most significant professional challenge of my life. My involvement began in December of '93. And I was at the table 27 times from that day forward, with over 1,000 phone calls. One meeting lasted 20 minutes. One lasted five days. Caterpillar is a great corporation and the UAW is a great union. There were just significant differences. Thank God it is done and it is resolved.
But we do other things. We, for example, are involved with the Waukegan School District and the NEA. We were involved with the Wheeling Community Consolidated Schools and their teachers' union. So we are involved not just in big, flashy cases, but in sites all across these United States.
We also provide what we call preventive mediation. This is the cooperative effort to try to teach people new and better ways of working together. Major efforts in that regard were with Nabisco and the Bakery and Confectionery Workers Union. They have formed a national partnership. We were involved in helping construct that.
You might take interest in the fact that the biggest bakery they have in America is in Chicago. Two thousand human beings work there. Fourteen hundred, fifty-eight members of the Bakery Workers work there. And we have done a significant amount of work there as well.
With GTE and their two unions, the IBEW and the CWA, with 64,000 members, we have done significant work there. And now here is a challenge. We have worked with the Postal Service. They have 800,000 American workers on their rolls. They have four international unions with about 670,000 unionized employees.
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And, at the request of Congressman John McHugh, Chairman of the Postal Subcommittee in the House, I have been chairing this past year, postal summits between Mr. Runyon, the Postmaster General, his direct reports, four international union presidents and their staffs, trying to see if we cannot bring a better relationship to the Postal Service and its unions. I will tell you that is a considerable challenge as well.
ARBITRATION AND ALTERNATIVE DISPUTE RESOLUTION
We provide arbitration services to the labor-management community. We made changes in our policies and procedures, the first since 1979, based on focus groups with arbitrators who perform the services for us and also with our customers, those who use our services. We made dramatic changes there.
With the support of this subcommittee, we instituted a modest user fee, about $30 a panel. This recovers all of the costs of the Arbitration Department. With the language that this Subcommittee provided to us, we are now dedicating 100 percent of these monies from the user fees to the continued education and training of our employees. Our budget asks you for no more money to train our people. We recover the cost through that modest user fee. And we have already collected $420,000 this fiscal year.
The fourth service is alternative dispute resolution, in which we are basically helping governmental agencies institutionalize conflict resolution processes, as opposed to litigation. We were involved with 45 different government agencies last year in providing services; agencies such as HUD, HHS, Interior, Agriculture, Education, etc.
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Examples. With EEOC, we are now helping them with their own internal discrimination complaints. We are doing likewise with the Agriculture Department. I mentioned to you last year that we were then involved in the Boundary Waters Canoe Area Wilderness dispute. I cannot say we resolved it, but I can say we went from 18 differences to 3. And now the findings from our work are the basis of legislation in the Senate.
LABOR-MANAGEMENT COOPERATION GRANTS PROGRAM
Our Labor-Management Cooperation Grants Program, which the late Senator Jacob Javits and Congressman Stan Lundine passed in 1978 to promote greater cooperation, is alive and well. We have not always been as successful in getting as much money as I hoped, but I am very pleased that we went from $1,000,000 to $1,500,000 with the support of this Subcommittee and OMB.
Just recently, for example, we hosted in Chicago at the Hyatt Hotel the nation's largest labor-management training seminar, with 1,900 people in attendance.
INTERNATIONAL PROGRAM
Lastly, I want to mention our International Affairs Program, not a statutory program, but one we have been involved in for over a decade in which we offer training and technical assistance to other nations around the world in labor relations and conflict resolution processes. This is all done on a cost reimbursement basis, largely through the State Department, U.S. AID.
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Last year we hosted a World Mediation Summit, at which we had 30 nations represented here. And 16 of the 20 world's mediation agencies were present. We have had 25 mediators involved worldwide, in countries like Bosnia—Herzegovina, trying to help mediate conflicts in the reconstruction of their own public utility system.
We are involved in Hungary, Poland, Cyprus, Panama, Ecuador, Salvador, and it goes on and on and on. But of particular interest to you I think was Taiwan. I made a trip to Asia during the past year, the first I ever made, because Taiwan has demonstrated an unusual interest, sending a delegation of about 35 or 40 of their leaders in government, in business and unions to America every year for 3-week training seminars.
And I met with the Prime Minister. He spent 30 minutes with me and quizzed me in quite detail and in very fine English, I might add, about exploring the possibility of opening an analogous organization in Taiwan.
While I was there, I went to Korea and met with high-level officials there. And with the crisis they are now going through in their financial markets, there is the probability of far more labor difficulties. And they were very anxious to request our assistance. And now we are going to enter into a cooperative agreement with them as well.
I will tell you that in the international arena, although we do not have the statutory authority, it is a fertile field for us. And it is far more than just labor relations or labor-management relations. It is conflict resolution. And this is an area that I would think that we might be involved in even more in the future.
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APPROPRIATION REQUEST AND NEW INITIATIVES
Our budget request, to bring it to closure here, is for $34,620,000 and 290 FTEs. There are two new initiatives, only one of which requires funding. They are GPRA initiatives. We are requesting $125,000 for capturing best practices in conflict resolution processes so we can work with other agencies and teach them best practices so they can institutionalize the processes within the agencies, rather than ask us to come in and mediate their disputes.
And another GPRA initiative with no budget implications for Appropriations is for us to go to the federal centers around the nation and provide training and education in partnership skills for federal sector labor relations personnel, rather than requiring them to come here to Washington.
CONCLUSION
Mr. Chairman, you asked me in terms of my recommendations. The White House has, in fact, sought my counsel. I have had two conversations with them. I have met personally with Bob Nash, the Director of Presidential Personnel. I have, in fact, made a recommendation, which I think is under advisement.
My effort there is simply to assure that there is a continuation of the direction in which we have started, which, in fact, is the direction I was asked to take when I was appointed to this position. And I expect to have continuing discussions with them.
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Let me close by saying to you and Congresswoman Lowey and this Subcommittee that we have sought to be proactive, not reactive, in this agency. We have sought, to be entrepreneurial, not status quo. We have sought, within the boundaries, within a reasonable framework, really, to run this little organization like a business and not a traditional government agency. And we are very pleased to be accountable and ask to be judged not by what we say, but by what we do.
I want to say once again to you and to this subcommittee it has been a great honor for me personally to work with the leadership of this Subcommittee, to work with the staff of this Subcommittee, who have, likewise, been sensitive. And having worked on the Hill, I have some sense of the value of staff.
Thank you once again for allowing us to try to be the best that we can be and, by so doing, I think develop with this Subcommittee a model of what the American people expect in a relationship between the Executive Branch and the Congressional Branch.
Thank you, Mr. Chairman. That concludes my formal remarks.
[The prepared statement follows:]
"The Official Committee record contains additional material here."
Remarks by Congressman Porter
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Mr. PORTER. Thank you, Dr. Wells. I have to say that you have managed your agency well. You have brought it into the 21st Century. You have internationalized the directions. And, more importantly than anything, you have brought people together in an understanding of the commonality of their interests, and to see that they can both win and resolve conflicts, with a record of achievement that I do not think anyone will be able to match.
And I would hope you would not leave government, but if you must, make it for not a very long time, please. We need people that provide that kind of leadership and inspiration.
I think I said this last year, Dr. Wells, but the problem with our media in this country is that they always focus on the failures and the bad news and they never tell the success stories and the wonderful things that happen when real leadership is provided to make a difference in our country. And people go away not understanding that there are people like you in government that really are making a difference in people's lives. And that is a source of great discouragement to us who see that these achievements are occurring and, yet, people do not really understand that they are there.
You have got a whole group of young people behind you that came in during the course of your conversation. They should know that what is on their television set is not the reality of what happens in this country. That is all the bad news. The good news you never hear. Here is some good news the people ought to hear and understand.
Dr. WELLS. Thank you, sir.
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Well, you know, this may sound hokey. I will tell you I still get a catch in my throat when I see the Capitol. I really believe that it is a great honor to serve. I take this very seriously. I feel blessed that I was asked by our President to join the administration and to try to make a contribution along with tens of thousands of us.
Those of you on the Hill, I have a pretty good sense of what you have to go through having worked on the Hill. I mean, people do not understand. But because of these efforts, people's lives are better and the quality of opportunities improved. That enriches our nation and the quality of life. It seems to me that this is what we are supposed to do.
So I feel blessed simply to have had a chance to try to serve and to try to make a contribution, sir.
Mr. PORTER. Well, those of us on the Subcommittee certainly feel inspired by the kind of service you have given, Dr. Wells. I just wish more people knew about it and understood it because they would be inspired as well.
Dr. WELLS. Thank you, sir.
FMCS CUSTOMER SURVEY
Mr. PORTER. In your statement, you talked about a new emphasis on education and outreach to your customers, including the national customer survey.
Dr. WELLS. Yes, sir.
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Mr. PORTER. Can you describe this more fully and tell us the value of this activity to the Service?
Dr. WELLS. Yes, I can, in fact. In 1993, we had 898 outreach instances by our staff. In 1997, we had 5,619. We have institutionalized this in the performance appraisal of our mediators to require that they go out and talk to customers.
The whole purpose here Mr. Chairman, is try to learn what the needs are of our nation's business and industries and our nation's workers and their unions, and to determine how well we are performing and ask how can we do better.
I call it listening to the marketplace. But also it is an opportunity to educate them because the truth of the matter is these services are voluntary. And as people learn about them, they are making greater use.
Most of our customers know about our traditional dispute mediation, our contract bargaining. Most do not know about our education and training, which we call preventive mediation, to strengthen and improve the relationship. And that has been a growth area for us. Under my tenure, that has gone from 10 percent of our business to 30 percent of our business.
And so listening to the customer is really a method by which to educate them about the services that this government provides, but we also listen to them about how we can do a better job.
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EVALUATION AND PERFORMANCE MEASUREMENT
Mr. PORTER. There are a lot of people that would say, ''Well, we should not be spending money to seek more interventions.'' I think they are exactly wrong, and I know you think they are exactly wrong.
To the extent that we can do that and bring people closer together, you are going to head off a lot of strife that would otherwise occur. I think the outreach and education are very, very important.
How does this information help you evaluate the effectiveness or productivity of your services? In other words, is it incorporated into your strategic planning in your GPRA activities?
Dr. WELLS. It most assuredly is. It gives us a baseline, if you will, of performance and customer satisfaction. And for strategic planning purposes, we are able then to judge what we are doing well, what we are not doing so well, and where we need to emphasize or make improvements in the future. The data is plugged directly back into our planning process for continuous improvement.
Mr. PORTER. How do you evaluate a mediator's performance? Obviously some conflicts are much more difficult to resolve than others.
Dr. WELLS. Yes.
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Mr. PORTER. How do you set a standard? And how do you make an evaluation?
Dr. WELLS. Mediators are evaluated by their direct supervisors, what we call our Directors of Mediation Services, which is a change that we have instituted. Now, supervisors are required to go out in the field with mediators and observe their performance in at least one dispute case and one preventive mediation case a year. And that is an indirect way of saying we have that measurement.
We have done a better job of measuring satisfaction with the agency than we have with mediators. For example, we do not send a questionnaire at the conclusion of our services in dispute mediation asking. ''How did we do? How can we do better?'' We do that, however, after our preventive mediation services.
Mr. PORTER. Thank you, Dr. Wells.
Ms. Lowey.
Statement by Congresswoman Lowey
Mrs. LOWEY. Thank you, Mr. Chairman. I want to join you in your very complimentary remarks to our guest this morning.
It is very clear to me—and I was glad that there are so many young people here to witness your performance—that your articulate presentation and your personal charm are your recipe for success. And it would seem to me that having people sitting around a table with you conducting the mediation would be sure to succeed.
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Dr. WELLS. Thank you, ma'am.
CATERPILLAR-UAW DISPUTE
Mrs. LOWEY. I was very interested in your role, of course, in the Caterpillar dispute. And I wonder what special qualities, what special activities enabled you to play that key role in settling the dispute or is it just your articulate presentation and your personal charm?
I ask that very seriously because we fund a whole range of programs. And the challenge to this Committee and the challenge to me—and I have been asking this question every year—is: How do you really establish excellence?
You can see great programs. You can see agencies that have outstanding mission statements. You cannot always find someone with your expertise to head that program. So the challenge to government to me is: How can we in putting together programs and funding these programs increase the odds of promoting excellence?
So I just wondered: What is it? You are leaving this agency now. What are the special qualities? What were the factors that actually enabled you to take such an important role?
Dr. WELLS. Congresswoman Lowey, Caterpillar was an unusual circumstance. The truth of the matter is what finally worked there was doggedness and determination because I was at the table over 27 times over 5 years. I wish I could suggest to you that some stroke of genius enabled that to happen. It did not.
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What did happen, though, after an initial effort last year, I did go individually and met with Don Fites who is Chairman of the Board and CEO of Caterpillar, and then with Steve Yokich, who is the President of the UAW, and secured from both of them their personal commitment that they were desirous of an agreement.
And then I worked very closely with their representatives: Dick Shoemaker, who is a UAW Vice President for Ag Implement; and Wayne Zimmerman, who is Vice President of Human Services at Caterpillar. And we just made a determination together that we were going to get it done, no matter what.
Now, having said that, it still took about 15 months to get it done. But I think that this commitment from top leadership, and then a willingness by the participants, enabled us to work through an enormously difficult, exceedingly complex dispute with lots of legal ramifications.
HIRING AND TRAINING FMCS MEDIATORS
Now, in terms of your question, your bigger question, about excellence, I think it is important that you be well-prepared for service. That is one reason we have changed our hiring criteria, not that our colleagues in the past were not prepared, but the demands in the workplaces of America are more sophisticated. And we needed to be sure that we had people who were better prepared, people who could help in a tough dispute, but also people who could educate and train the parties, who could really proselytize, if you will, say, you know, ''It is okay to cooperate. Actually, it is good to work together. That is how you build a better product and have profits. And that leads to jobs.'' So we have raised the bar appreciably.
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We have spent more time in educating our own people, Congresswoman. When I took office, our new mediators had one week of orientation. Now they have three weeks over the course of a year. And we focus one week on dispute, one on preventive mediation, and the other on alternative dispute resolution.
Anyway, we are more intensive in the up-front training. We now have continuing education and training. We did not have a dollar bill, honestly, to educate and train our people. This Subcommittee, in its wisdom, was kind enough to support my efforts to institutionalize continuous learning for our people, both in the national office and in the field.
Also, we made a policy decision to downsize in Washington. We have dropped our national office staff by 27 percent. As people have retired or chosen to go elsewhere, we have been very, very frugal in replacing them. But we have then hired in the field. So we have been able to increase our mediators in our service by about 8 percent.
We set a very high standard, too. We were very clear about what we wanted to do. We had a plan to do it. We had accountability. We have more outstanding performance among our mediators than we ever did before because we had given them the tools, the equipment, and the motivation. Some people have not made it, and some have elected to no longer stay with us.
So it has not always been easy. Change has been tough on all of us. But I think if you expect excellence, you prepare people for excellence, you set a high standard and try to meet that standard yourself, then people will follow.
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Mrs. LOWEY. We understand in this Committee the importance of your work and that it has a direct impact on the economy. If you can prevent a strike or a lockout——
Dr. WELLS. Yes.
Mrs. LOWEY [continuing]. Clearly this has a direct impact on the economy.
You talk about training your mediators. And I know an important part of your function is to train labor and management representatives——
Dr. WELLS. Yes.
PREVENTIVE MEDIATION
Mrs. LOWEY [continuing]. In their own dispute resolution skills. How successful have you been in training labor and management representatives in these skills so that your services really are not necessary, not that we want to put you out of business?
Dr. WELLS. Yes.
Mrs. LOWEY. But obviously we want to avoid reaching that point.
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Dr. WELLS. Sure.
Mrs. LOWEY. Have you been successful in that regard?
Dr. WELLS. Well, I think we have because during my tenure there, we have gone from 10 percent of our mediation work being in the realm of what we call preventive mediation,—you think of preventive medicine—education and training, to 30 percent. And that is a fairly significant improvement. I should not say improvement. Interest, a greater interest.
But I am going to ask Richard Barnes, our Deputy Director for the Field, if I could, because he works hands-on and I do not want him to have come to this meeting and not even have a chance to respond to a question. He could respond better than I did, if I may.
Mr. BARNES. The answer to the question, Congresswoman Lowey, is we have had tremendous success. It is an ongoing process. We see changes in labor and management groupings. A company changes its top leadership. The unions change their top leadership.
So to perpetuate the change in organizations, we make ourselves available routinely every three to four to five years. We will continue the process of education.
I think one of the things that we have done that has really helped the labor-management community is to train the trainer, where we will work with their staff to train both the corporate and the union leadership.
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We have had tremendous success with that. Within the first six months of this year, our demand was up 20 percent over this time last year. The cases that we have actually closed in training of people is up 20 percent at this point. That demand continues to grow each year as we see our work transition to more training.
MEDIATING EMPLOYMENT DISCRIMINATION COMPLAINTS
Mrs. LOWEY. And, lastly, I was very interested to see in your testimony that you are helping to reduce backlogs of employment discrimination cases for the EEOC or even developing curricula for school-based conflict resolution programs.
Dr. WELLS. Yes.
Mrs. LOWEY. Perhaps you can share with us some information on these services.
Dr. WELLS. These are alternative dispute resolution services, Congresswoman. Basically, it is the application of mediation skills and techniques to issues that otherwise would go to litigation.
It is a tremendous growth area. One of my colleagues will have the data on the growth which is unbelievable. The first year I was there, it was at 14 percent growth. Then '95, it was 29. '96, it went down. It was down eight percent because, frankly, there was a government shutdown here. '97, it was up 122 percent. And so far this year, it is up 188 percent. People are finding that it is better to resolve these EEO complaints, one example, by mediation, as opposed to going to court.
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We are performing these services for four or five different governmental agencies, including the EEOC itself. For the Agriculture Department, we are doing a good bit of work. We are now in a negotiation with the Postal Service to do likewise.
And this is a tremendous growth area for us and really what this simply says is, ''Look, if you have got a problem, if you have a conflict, why have a war? Try to sit down and work it out,'' whether it is a workplace complaint, whether it is an international issue, or whether it is a discrimination complaint in a workplace.
Mrs. LOWEY. That is very interesting because I remember some time ago reviewing some of the work of the EEOC——
Dr. WELLS. Yes.
Mrs. LOWEY [continuing]. And talking to some of the principals involved. It was my understanding that what they were doing in most situations was just passing it on to the judicial system. So that a ruling by the EEOC was not necessarily a ruling that was carefully thought through. Has that changed, in other words?
Dr. WELLS. Richard?
Mr. BARNES. As an example, with the Department of Agriculture—and one of the programs we have picked up was assisting them with their EEO cases—at the time we met with them, they had a 19 percent success rate internally with mediation.
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I am really not sure, Congresswoman, of the numbers at this point. I certainly can provide them for you. But I am clear in my mind that we are over a 50 percent success rate today, and I think we are more into the 55 percent success rate with that mediation.
Mrs. LOWEY. That you have instituted since you have gotten involved?
Mr. BARNES. That is correct, using our skills and using our mediators and the alternative dispute resolution design that we have developed for EEO dispute mediation. I am almost positive that we are above 55 percent, but we can provide you with that number.
Mrs. LOWEY. Well, I thank you very much. And, again, we certainly appreciate your service. I must tell you that I still look at that Capitol dome and with that same feeling of awe and feel it a great privilege to serve. I think when we stop feeling that way, we should not be serving in government.
So we are grateful again for your appearance here before us, and we wish you good luck. I am sorry that I missed our esteemed colleague, Congressman Rogers, who obviously had wonderful things to say.
Dr. WELLS. He was very generous.
Mr. PORTER. Thank you very much.
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Dr. WELLS. Thank you.
Mr. PORTER. Thank you, Ms. Lowey.
Dr. Wells, on the reimbursable contracts with the EEOC and USDA and others that involve large numbers of complaints, how do these contracts impact on your mediators' ability to perform their other mediation and training responsibilities?
Dr. WELLS. Well, it is art more than science. Clearly we have difficulty because the growth in our business has been considerable, especially in these contractor services. We do the best we can within our budget constraints and within the FTEs we have.
Our people are really busy, as you could see with the improvement of productivity. It has been significant. We have to make judgment calls. We had one mediator who had four different sessions in one day, three disputes, and a training seminar.
So I guess what I am saying, we are stretched. And I will say whoever succeeds me probably is not going to be able to come before you and show the kind of productivity improvements and increases in the future which we have experienced. I think we have taken most of the fat out of the system. So we have done about as much I think as we can reasonably be expected to do given the constraints we have on FTEs.
MEDIATOR EMPLOYMENT STATISTICS
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Mr. PORTER. How many of your mediators are women and how many are men in percentage terms?
Dr. WELLS. That is a good question.
Mr. PORTER. Just out of curiosity.
Dr. WELLS. While they are looking, let me tell you I am very proud of this figure. While they are looking for the data, the last hired class we had last year was 26. That was the largest single class. Of those 26, 13 were white males. The rest were women and people of color.
Of the 70 new hires—we do have that—who have come on largely since I have been there, 37 were males, white males, 5 were African American, 3 were Asian American, 6 were Hispanic, 13 were female. The total, sir, in terms of male to female is 50 to 20 of the new hires. But of those 70, only 37 were white males. I can assure you in the past it would have been an appreciably higher figure.
EVALUATING MEDIATOR PERFORMANCE
Mr. PORTER. You said on my last question before we went to Ms. Lowey that your mediators are evaluated by their supervisors in the field. How, then, do you deal with excellent performance and how do you deal with poor performance?
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Dr. WELLS. Well, as I indicated earlier, we have higher expectations. We have changed the performance appraisal system. We are rewarding our people who are performing with excellence. Last year 51 of our approximately 200 mediators were counted to be outstanding, and this was not grade inflation. And we provided a $2,500 bonus which, by private sector standards is not much, but by government standards is considerable. We really gave them recognition for a job well-done.
I will also tell you, though, that seven mediators who were not able to fulfill the performance standards are no longer with us. And that sends a signal that we are pretty serious about this business.
Mr. PORTER. What percentage of your current mediator workforce has been hired during your tenure?
Dr. WELLS. Thirty-seven percent have been hired in the last four and a half years under our revised and more rigorous hiring criteria. If I could just go on, I might suggest also that these new mediators have tended to be of higher education, broader knowledge and skills, and technologically sound. There are a higher percentage of females and also a greater diversity in the workforce than we have hired in the past as well, sir.
Mr. PORTER. What kind of educational background would serve you best to become a mediator?
Dr. WELLS. Boy, is that not a good question.
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Mr. PORTER. Is there any——
Dr. WELLS. Yes. That is a great question. I think one needs to be prepared. Clearly we like to see someone with strong background in conflict resolution and collective bargaining.
In the past, you had to have seven years as a chief spokesperson in collective bargaining or we did not hire you. Quite frankly, what happened is women did not qualify and generally people of color did not qualify because they were not chief spokesmen with seven years of experience. So we made that more flexible and looked for comparable experience as well.
I think you need a basic level of education. You do not need a baccalaureate degree, but I certainly think that is very helpful to have. So we have given increased attention to that, but we are still hiring people who do not if they have demonstrated competence in other ways as well.
I think flexibility is so important because you have to be agile in this business. You cannot be dogmatic. You have to be willing to listen, and you have to be willing to really stretch a little bit.
Something I say, for example, when I am at the table—and I only get involved in the toughest cases that really are visible because our staff does a good job—I simply say, you know, ''If you learn to walk in the other person's moccasins, you know what it feels like.'' And if you can look within yourself and, say, if you really are sincere about achieving the goals that you have outlined for these negotiations, then you need to help your colleague across the table achieve his or her basic goals, too, so that both sides can win.
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So I guess the truth of the matter is I do not know if there is a precise prescription, but I look for people who have demonstrated competence and excellence, who have had some minimal level of achievement, both academically and also in the real world, folks who are willing to stretch and want to be peacemakers.
THE PEACE INSTITUTE
Mr. PORTER. You know, the concept of both sides winning is—and we have talked about international matters before—not understood in a large part of this world, I find. And if America can change the culture of the world to understand that both sides can win—and often this is exactly what happens—it can go a long way to resolving disputes that go back centuries, where people dwell on the past and believe that if they gain something, the other side loses and vice versa.
There is so much of that that you see out there, whether it is Armenia and Azerbaijan, over Nagorno-Karabach or whether it is in the Middle East, whether it is in Cyprus. There is so much looking to the past and not trusting the other side because if they get something, you lose something.
Somehow we have got to change people's culture to understand that working together, both sides can win. And then we could resolve a lot of these ancient disputes and get people into a mode of accepting one another in working together and having a future that really is good for both sides.
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Dr. WELLS. Absolutely.
Mr. PORTER. That is why I wondered: Did you talk to the Peace Institute and see if some of the practicalities that you bring to your work can in some way rub off on their effort in training mediators and conflict resolution people?
Dr. WELLS. I have, in fact, met with Dr. Solomon, the President of the Peace Institute, some months ago. We have a working group of some of their staff and our staff exploring complementary efforts.
We joined them in two programs—in September at the World Summit here in Washington and last November, in Greece, where we trained diplomats from the Balkans.
We are actually meeting this week again with the Peace Institute. We have done a lot of talking, but we also have had some accomplishments.
I think we had to talk through things to see where we could come together. My sense is they have the substantive knowledge in the international arena, and they have very fine theoretical models. We can marry our very practical hands-on conflict resolution skills with them and I think provide an important service.
We are ready to do that, and they have indicated that they, too, are ready. So I think it is time for us to go forward in more concrete and tangible ways. And we are prepared to do that.
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Mr. PORTER. Well, they are going to be here this afternoon. So we are going to push them in your direction.
Dr. WELLS. Okay.
MEDIATION STATISTICS
Mr. PORTER. The number of collective bargaining negotiations with active mediation increased in 1996 and 1997 for the first time in a decade. Why is the number increasing? I think I know, but perhaps you can tell us that specifically.
Dr. WELLS. While I begin to answer that question, we have a table that I would like to share with you that indicate the change.
[Table attached.]
"The Official Committee record contains additional material here."
Dr. WELLS. I think it has increased, sir, partly because of our customer outreach and the fact that we are making people more aware of our services. Second, we have raised the bar and we have higher expectations of ourselves. Third, I think it is because we are being asked to do more, quite frankly.
If you will look on the far left column there on dispute mediation cases, you can see in '94 we were down 6 percent. Well, the truth is for a decade, we have been down every year until the turnaround happened in '96. And now it is beginning to go up.
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Dr. WELLS. This 7 percent may not sound like much in 1997, but it is a fairly appreciable increase when you look at a decade of decline. And we are up 13 percent to date this year.
Right next to it is our work in preventive mediation. Congresswoman Lowey, you had asked the question there. That has been a tremendous growth area for us.
My first full year was 1994. One of the things we did to change things was to look at our rewards system. Our performance appraisal system for our mediators counted a dispute twice as highly as it did a preventive mediation when, in fact, the preparation and the execution of a preventive mediation, training and education, is really more time-consuming than just going to the table, not more demanding but more time-consuming.
So we made a policy change that preventive mediation and ADR would count equally for performance appraisal purposes as dispute. And that gave added incentive to our mediators and to embrace these new processes in a more vigorous way.
And the truth of the matter is the new mediators we are hiring are more comfortable and are excited about involving themselves in preventive mediation and ADR. And so that has contributed to an increase as well, sir.
YEAR 2000 ISSUES
Mr. PORTER. I have to ask you the mundane question we are asking all of the agencies under our jurisdiction, and that is: Are you going to have a year 2000 problem with your internal systems? Ms. Leonard says no.
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Dr. WELLS. We are taking the measures to ensure that we do not have a year 2000 problem.
Mr. PORTER. Good. It is something we are very worried about with agencies that deal with the public with benefit checks and the like. And so I am hopeful that we can head off any possible problem in all the agencies under our jurisdiction.
We have taken the matter very seriously. And I know you were represented here when we had the consolidated management hearing earlier in the week.
Dr. WELLS. Yes.
Mr. PORTER. Ms. Lowey, do you have additional questions?
Mrs. LOWEY. No. Thank you.
INSTITUTIONALIZING NEW DIRECTION
Mr. PORTER. Let me finish by saying, Dr. Wells, that you have given us four and a half years of real change in the culture and direction of the agency that you have headed. And you have made government work better for people, which is what we are all trying to do. We are going to miss you very much.
As a last question, we want to know not only what you have done currently but what you have done that will make tomorrow and next year better. So can I ask you: What measures have you taken to ensure that our investment in your agency and your leadership continues to pay dividends down the road for us so that we can see the same outstanding results in the future that we have seen under your leadership?
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Dr. WELLS. Well, I think number one is that the next person who is selected as the Director of the Federal Mediation Service continues on the path that we have gone. In fact, this was the path, the direction I was charged with when I accepted this responsibility of reinvention, reengineering, or change and preparing the agency for the 21st Century.
So I have every reason to believe that the administration will do that. I am talking with them, counseling with them. So the next director must continue this direction. So that is key and fundamental, and that is the administration's responsibility.
A second way to assure, I think, Mr. Chairman, is for careful and diligent and rigorous oversight by the Congress. I think checks and balances are important. And I have always sought to be judged by what we have done. So I think that your Committee with the power of appropriations has extraordinary influence should it choose to exercise that influence. And so that is a second means.
A third means—and this is something, frankly, that I did not get done and should have and I hope that my successor will—is to establish a customer council for the Federal Mediation Service in which we would have high-level executives from our customers, both firms and unions. It is provided for in our statutory enabling legislation going back to 1947. A customer council could provide I think oversight and direction. And I think that is something that ought to be investigated and considered as well.
And last, but not least, really, the demands of our customer. I think we have raised the bar with them and what they now expect from us. And I think they need to demand more from us because, after all, we are in for public service. And they have every right to expect us to respond to their needs with efficiency and competence and high quality. And I would suggest that as well.
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One last point I did not make earlier, if I could, with you, Mr. Chairman. You asked us to be more vigorous and creative in outreach in the international arena last year. I went aboard myself. I had not done that before, both in Europe and in Asia.
I was immensely impressed. I was shocked, actually, to hear the labor leadership and the business leadership and the governmental leadership of first Ireland, then United Kingdom, and then in Brussels, Belgium talk about the need for what they call social partnership between government and unions and firms.
Ireland has the highest economic growth rate of any nation in Europe now and the lowest unemployment rate. And they attribute a great deal of that to social partnership.
I will tell you I was astounded when I met John Brennan, the Deputy Secretary of the top trade union in the U.K. I forget the name of it. But when he talked to me, he said: Look, we are real good at fighting over here. We know how to do that in England. Now we need to learn how to work together. And social partnership is our future.
So I thought that was a message. We are trying to do the same, in cooperation as well. A problem we have is we cannot get money. We cannot use appropriated funds for our international work. And so we have to enter into contract with the State Department and U.S. AID or the Peace Institute or whomever.
A number of foreign governments have said: We will pay for you to come over here and train and educate our people, but we do not have the authorization. And OMB has said they would support this.
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So if your Committee would be willing to consider the possibility of enabling language that would allow this, we could do a far better job of responding because I will tell you—and I can take no credit; this was before my time—this agency of FMCS trained the South African organization which is equivalent to FMCS and is magnificent. They are involved not only in labor, but all kinds of conflict resolution.
We did likewise in the former Soviet Union. We have done it in Russia and El Salvador. And so it seems to me that we have an important role to play.
We do not try to tell these foreign nations to do it our way, but what I say is: Look, here is what has worked for us. And you see what, if anything, we do is relevant to you, especially with emerging nations and emerging economies. It seems that we would have an important role to play in helping them develop an infrastructure of conflict resolution. And they are seeking to do it, and they are calling us. We are not able to respond as well as we might.
So this is a means by which you could aid us if you think we should move forward in that direction, sir.
Mr. PORTER. Well, I think that would be a wonderful additional legacy that you might leave. And while we do not have jurisdiction to do that, we can certainly put a provision like that in our bill if the authorizing committee of jurisdiction will allow us to do it. And we would be delighted I think to give you that additional authority and provide additional resources to accomplish that. I think it would be a very, very important part of the mission that already you have done a great deal to advance, even without that authority.
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Dr. Wells, let me say you have provided tremendous leadership. You have made a difference for people, which is what it is all about. You have raised the standards within government. That is important. People can look at the work you have done in your agency as a model and try to emulate it in theirs. That will certainly reverberate all throughout our government.
And we thank you for your outstanding service to our country. Thank you so much.
Dr. WELLS. Thank you, Mr. Porter. And I thank Congresswoman Lowey and this Committee.
The unsung heroes are our men and women, our mediators, all across America who are working to resolve conflicts and to really bring more peaceful resolutions to differences in the American workplace. And so all that we have done has been enabled by their public service. And I want to commend them to you for the good work that they do.
I thank this Committee for its leadership and for listening to us and helping us do the job that we were hired to do. Thank you, Mr. Chairman and Congresswoman.
Mr. PORTER. Thank you, Dr. Wells.
The subcommittee will stand briefly in recess.
[The following questions were submitted to be answered for the record:]
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"The Official Committee record contains additional material here."
Wednesday, April 22, 1997.
NATIONAL EDUCATION GOALS PANEL
WITNESS
KEN NELSON, EXECUTIVE DIRECTOR, NATIONAL EDUCATIONAL GOALS PANEL
Mr. PORTER. The subcommittee will come to order. We continue our hearing on the budget for fiscal year 1999 and are pleased to welcome Ken Nelson, Executive Director of the National Education Goals Panel.
Mr. Nelson, if you would please proceed with your opening statement and then we will have some questions.
Mr. NELSON. Thank you, Mr. Chairman and members. I will be very brief. You have received a lot of our materials as we put them out during the year.
I like this Einstein quote that says we cannot begin to solve the complex problems we face today with the same level of thinking we had when we created them; because I believe that the bipartisan National Education Goals Panel, created by the Bush administration, with the Nation's Governors in 1989 and 1990, created a new level of thinking which we have tried to live out and deliver. And that is to provide a results-driven public accountability and reporting mechanism on the effectiveness of education in the States and the country. I wanted you to each have the 1997 report because it illustrates how we attempt to do that.
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First of all, we illustrate the respective goals, the eight goals, and they, as you perhaps recall, were presented to the country in a measurable manner, with the specific objectives around them, and then the panel itself put specific indicators around them so we could report on progress over time.
The Nation's report card is listed on pages 30 through 33 of the 1997 report, and if I can call your attention to that, here is how we try to report on progress. Again, pages 30 through 33. We have 8 goals listed, with 26 indicators around the goals, those indicators by which we can get data reporting on progress over time. This shows the baseline of data indicated by the box at the top, and that is the data we gathered as close as possible to when the goals were first established in 1990. Then the update is the latest data that was gathered, and then the progress, showing the arrow upward or regression downward or status quo.
If I could indicate on indicator No. 3, Goal 1, the ready-to-learn goal, it indicates an encouraging trend of more families reading to their children. Through two data points, 1993 and 1996, we show a 6 percent gain there. And then across the page on indicator 8, under Goal 3, math achievement was encouraging for the country in that it is up in grades 4, 8 and 12. Not all signs are positive, of course.
These are graphically illustrated. Then on Page 37, where we try to illustrate where we must be to get to 100 percent. Now all of the goals are absolute. We are not sure we are asking that really of the country, but we thought we better remain consistent and state it in that manner. So on Page 37, we illustrate graphically how far we have come with those data points, and then on page 43, again, it shows the math achievement, and, again, if we are going to get all of our children to that performance level, we have a long way to go.
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I would like to also call your attention to State report cards which start on page 77 with, of course, Alabama, first in the alphabetical order. You can see that for the States we have 33 indicators for the 8 goals, a few more than for the national because we have some more data. This year, or last year, 1997, for the first time, we illustrated not just how Alabama is doing against itself, its own baseline, but how it compares to the U.S. baseline and to the range of State scores and to the median scores. It is interesting that the evolution of the Goals Panel, when it was first started, Governors at that time were a bit hesitant to have States compared to each other, but now they really want it more and more, more State officials and I think national officials as well, are asking how well are we doing? What are our benchmarks? Those benchmarks are other States, and therefore the States want this kind of data.
Congress has asked us to do more than just report on progress toward these goals. They have asked us to put this into a very understandable and usable report by parents, the general public, as it states in the law, so we produce this summary document as well. We published many more of these. It has the Nation's report card in it and it also has our theme of math and science—21st century, prompted by the TIMSS report of last year. We always want our publications to pass the barbershop test so the person waiting to have their hair cut in the barbershop can pick this up and make sense of it. So we have focus groups every year to give us feedback on how well do these read.
You will be interested in knowing we also have put all of this information on our Web site and we have this brochure just being launched, just being distributed now, but our Web site is used significantly because States want comparisons. And so, frankly, the Web site provides more flexibility than the printed document.
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If you, from a respective State, Mr. Chairman—say Illinois—you want today to find out how neighboring States—say Michigan or Wisconsin—are doing compared to these indicators here, our Web site allows you to do that and print that out. That is more flexible than the printed document.
Mr. HOYER. Do we have a copy of your Web site brochure?
Mr. NELSON. I will get it to you. Absolutely. I should have brought more. We did have 100,000 hits on this this last month, so it is increasing exponentially as the word gets out, but I will make certain each of the members get that.
Mr. HOYER. Thank you. Excuse me.
Mr. NELSON. Thank you.
Then, in addition, the documents, the mandate from Congress said we should work with States and communities to escalate progress toward goal achievement, not just a report, but to facilitate progress; so in that vein, we have published these documents. One is on Ready Schools. The panel is concerned that we not just make children ready for schools, ready to learn, but that we make schools ready for the children. And this has 10 keys in it in terms of how we can best do this, designed and developed again with people in the schools, be it principals, parents, teachers, and sent out at large to all schools in the country and all parent groups.
Also, the Congress specifically asked us to provide this document on assessments of early childhood, and how to best do that, and that was just delivered this past year.
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We are also now working on some new publications that will be of interest to the panel. Number one, very shortly we will be releasing a report that does a very strong comparison, State by State, on all the NAEP-level data for the States, and that will be quite interesting and quite dramatic. It will allow States to look at even subgroup populations in their States to find out how they can improve strategies for moving and responding to the subgroups. So we try to make our information actionable by State policymakers.
The other report we are working on which will be released later this year is how States and communities are reporting assessment results to parents and families. It is a very dramatic issue right now in all States. All States are moving toward higher academic standards, and they want to promote the standards with the parents and the larger public. How they best do that is what they are struggling with; and then how they best help parents understand what the assessment results are going to be.
You might be fully aware that some States are raising the bar quite significantly—Massachusetts comes to mind, Colorado comes to mind—for graduation requirements. And when students don't achieve those new standards, sometimes parents are upset about that. Policymakers, Governors, State legislators, are anticipating that and trying to communicate best to parents what to expect and what these assessment results mean. And so we are working with multiple States and communities to put out a publication on that and we will probably release it when we release our 1998 report.
This year, Mr. Chairman, for the first time, we are going to do a downlink, we are going to telecast it throughout the country to all State-level policymakers, whom we consider our focused customer audience, in terms of how they can best use this document, how they can best use the State assessment document.
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This year our panel is chaired by Cecil Underwood, Governor of West Virginia. As you know, it is bipartisan. Governor Hunt of North Carolina was last year's chair. This year, Governor Underwood created a new Task Force on the Future of the Goals, cochaired by Governor Hunt and Governor Engler of Michigan, because next year the reauthorization legislation is up for the Goals Panel, and the Goals Panel wants to come up to the Hill properly prepared to comment on that reauthorization.
Finally, Mr. Chairman and members, I will conclude by saying that we are constantly trying to be customer-responsive. We have defined our customer base primarily as State policymakers; that is, Governors, State legislators, chief State school officers, State boards, and business education coalitions, and then parents and the public; and we respond to them with the best-quality products and services that we can render, and we do it through the four strategic performance objectives listed in our budget.
Finally, back to the Einstein quote. We believe, the panel believes, it is providing a new level of thinking as we provide these resources to communities and States as they grapple with the complex problems that we are facing.
Thank you very much, Mr. Chair and members.
[The prepared statement follows:]
"The Official Committee record contains additional material here."
Mr. PORTER. Mr. Nelson, thank you for your statement. Has the media shown a great interest in any of this?
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Mr. NELSON. Well, to some degree, Mr. Chairman, they have. Let me start with when we released our annual report. C–SPAN has always been present. In fact, Governor Romer of Colorado cites the fact that when he bumped into Bob Dole once, Bob Dole said to him, ''I saw you on television, and it was on C–SPAN,'' and Bob Dole was working on his bicycle machine or whatever and watching that at the same time, and so Romer was very impressed with that.
Consequently, we have made sure the media gets the full attention on the release of our report, and they have been very helpful. We have a media contract, so C–SPAN and CNN have been at the last three of our meetings and have gone live and then rebroadcast across the country. We follow up with print media in every way we can as well, but it is a question we are always asking ourself. We would like more media, of course.
Mr. PORTER. It seems to me that these statistics and indications of progress or lack of progress are very helpful to State policymakers, but the American people ought to know about them as well, and the broadest dissemination of this information to motivate us—if you look, for example, at goal three on Page 31, under mathematics achievement, our record there as a country as a whole is pitiful. And while the indicators are up, the results of the TIMSS test recently for grades 8 and 12 show that relative to other countries, we are doing very, very badly, and we have a long, long way to go.
So it seems to me that somehow these kinds of things ought to motivate the American public, parents particularly, to see if they can get a little greater achievement out of their children in school, and one of the primary uses of this ought to be to influence people broadly if that can be done.
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We consider your agency a well-run agency.
Mr. NELSON. Thank you.
Mr. PORTER. I don't have a lot of long questions for you. In fact, the questions I have for you I think can be answered for the record, and I would just like to thank you for the good work that you are doing.
Mr. Hoyer.
Mr. HOYER. Thank you. I was supportive and am supportive of the Goals and I am supportive of the assessment of Goals because they give us some opportunity to judge how we are doing.
The Chairman, of course, has made an observation that I agree with, that we ought to be doing better. Let me ask you something, just so you can explain to me how this works. On page 44—and this is not unique, it is the same kind of language someplace else, in a number of other places—when you say on the top of page 44, table 4, ''Mathematics disparities and percentage points between whites and minority students to meet the goals in performance standards in mathematics,'' when you do the percentages there, explain to me what that means. Because you talk in terms between white and minority students. What does the percentage mean?
Mr. NELSON. The percentage would be those who performed at the performance level of achievement that was established by NAGB. NAGB set some achievement levels called proficient and advanced. We report on that, so those percentage marks indicate that percentage passed at that level and the——
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Mr. HOYER. But how does that relate to white and minority students? Maybe it is on a previous page, but it is confusing. How does that relate to white students? Did 40 percent of white students or 50 percent of white students meet the standards? Who met the goals and performance standards in mathematics? How do I judge that against what majority students have done? It confused me a little bit and maybe I am not reading it right. Let me see in the explanation over here.
Mr. NELSON. The box at the side does allude to it, but I don't think that explains it fully. This might be one I would have to—I didn't bring my statistician with me today.
Mr. HOYER. Now this may be the gap, not the percentage of students who met it.
Mr. NELSON. I think you might be on to it there, Congressman.
Mr. HOYER. There was an 11 percent gap between the white students meeting the standard and the American Indian student?
Mr. NELSON. Yes.
Mr. HOYER. Let me suggest that it is a difficult graph. If this is the gap as opposed to the percentage of students that met the Goal, then it is nice to know. If they are all failing, but the African Americans are failing at 11 percent worse than whites or Hispanics or whatever, that is not particularly gratifying.
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Mr. NELSON. This is one I better get back to you on. I'm sorry I don't have that at my fingertips. It is the first time I have been confronted with that question.
Mr. HOYER. I did not mean it as a stumper. I read it three times and thought I must be dumb because I do not understand what this is telling us.
Mr. NELSON. It says to me we haven't said it clearly enough. This is good feedback, actually, that we haven't said it clearly enough, so we will work on that and we will also get back to you.
Mr. HOYER. It seems to me it is really important. If I am an African-American parent or I am a Hispanic parent and I want to judge how my young people are doing or how my son or daughter is doing for when they enter into the workplace, I want to know how did the majority of students do, how did minorities do, how did African Americans do versus Hispanics or Asian Americans. Not so I can look at the other people, but so I can look at my son or daughter and say to the system, to the John Porters, Steny Hoyers, et cetera, that we can do better. I think that is what these Goals are for.
It would be helpful if you can clarify that. As I look at these graphs, I understand what they are saying, but I think they are a little esoteric. That is a constructive criticism, because I am very much in favor of what you do and I am glad to hear the Chairman's observation and the staff observation that you are doing a good managerial job.
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Thank you, Mr. Chairman.
Mr. PORTER. Thank you, Mr. Hoyer.
Mrs. Northup.
Ms. NORTHUP. I just sort of wondered how much you all are involved, if at all, in cause and effect or prescriptions for change. For example, do you notice any trends that you diagnose? I see one in particular, and that is both at my State level and at the national level, the percentage of teachers that have a degree in their main teaching assignment declined. And clearly, the reason that goal was there is because you think it is important that teachers have a degree in the area they teach. Do you make any statement as to why that is true?
Mr. NELSON. Mr. Chairman and Congresswoman Northup, yes, we analyze, as best as we can. In fact, that very indicator prompted us to establish a Task Force on Professional Development. And we have a report going out from the panel now to all Governors and State legislators in the country, recommendations on how to enhance professional development, with a lot of good State examples cited in terms of how to do that, and it raises the question about whether people are teaching out of field. It is practiced because of necessity at the local level, a shortage of teachers in that professional field, whatever generates it.
Ms. NORTHUP. Is it that, or is it teachers that have more seniority bid on teaching slots outside of their primary certification?
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Mr. NELSON. Well, frankly, we have not gone in to analyze it that deeply. You are probably on to one of the facets right there, but we have not gone into it.
Ms. NORTHUP. Well, I think that is really important. If the main cause is not that we don't have teachers who have certain degrees in certain areas but that we allow people to bid on jobs outside of their primary certification, if we don't state that, that becomes a problem, and then it seems like all we are doing is scorekeeping here.
Mr. NELSON. Right. That is a good reminder. I will get back to you on that to see what we can do, because, as I said, we are already working on that area but not specifically on that issue.
Ms. NORTHUP. One more question.
Mr. NELSON. Yes.
Ms. NORTHUP. Are the statistics significant enough that you can break it down any closer than whole States?
Mr. NELSON. We struggle with that all the time. We are not able to do that because our data cannot be disaggregated. This is State-level data. We would love to do that, because I believe the data gets more powerful the closer you get to the student. Some people have asked us to look at that.
As a matter of fact, when we look at the future of the goals, one facet we will be looking at is how can more of this link with the States and local use of data; so that although a lot of the State data—we always report comparable data, and yet every State reports noncomparable data, and they rely on a lot of that to change and improve their system. It is not that they are in conflict; they should be complementary, but we right now are not able to go below State-level data.
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Ms. NORTHUP. Since you do have separate fields, though, in your programming, clearly for breakdown by race, can you breakdown the States by race?
Mr. NELSON. Yes; we have done that to the subgrouping and I will get you examples of that.
Ms. NORTHUP. I would be interested in that because our minority community is raising a lot of questions about how their children are doing on tests and feeling that they are not doing well, and not receiving the benefits that they need. And I would be interested in seeing, based on the State data, whether or not that holds out. I mean, the fact is they are having trouble getting the information from the States to get it broken down that way, so if you could do that for me, I would appreciate it.
Mr. NELSON. We have the report that is forthcoming which does that, by subgroups, all minority groups, and I think male and female, on all of the NAEP State-level data we have.
Ms. NORTHUP. Okay, good. Thank you, Mr. Chairman.
Mr. PORTER. Thank you, Ms. Northup.
Off the record.
[Discussion off the record.]
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Mr. PORTER. Again, thank you for the job you are doing. I do have a number of questions for you to answer for the record.
The subcommittee will stand in recess until 10:00 a.m. tomorrow.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Tuesday, April 28, 1998.
NATIONAL MEDIATION BOARD
WITNESSES
ERNEST DuBESTER, CHAIRMAN, NATIONAL MEDIATION BOARD
STEPHEN E. CRABLE, CHIEF OF STAFF
JUNE D.W. KING, CHIEF FINANCIAL OFFICER
MAGGIE JACOBSEN, BOARD MEMBER AND FORMER CHAIRPERSON
Mr. PORTER. The subcommittee will come to order. We continue our hearings on the fiscal year 1999 budget with the National Mediation Board, and we are pleased to welcome Ernest DuBester, Chairman. Mr. DuBester, if you will introduce the people you have brought with you, then proceed with your statement.
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Introduction of Witnesses
Mr. DUBESTER. Thank you, Mr. Chairman,. Good morning. Accompanying me today at the far end of the table is Maggie Jacobsen, Member of the Board, and former Chairwoman. To my left is Stephen Crable, Chief of Staff of the agency. And to my right is June King, our Chief Financial Officer.
I have submitted a statement in addition to the budget justification. I would ask that it be incorporated into the record.
Mr. PORTER. Yes.
Statement Summary
Mr. DUBESTER. I will make a couple of brief observations. Mr. Chairman, as I know you are aware, over the last five years the National Mediation Board has been reexamining its mission to improve customer service, agency efficiency and cost-effectiveness at a time of diminishing resources.
Last year we reported on the successful reorganization of the NMB which has resulted in greatly enhanced agency services at a reduced cost to the public. Today I am pleased to report that the NMB continues to move forward with its initiative to reorganize and to improve the quality of its services. The agency's reorganization, as we previously reported, included relocation of the mediators to the Washington, D.C. office, expansion of the services offered by the agency, and reorganization of the agency's management structure at the most senior staff levels. It has allowed the NMB to use its mediator corps and support staff in a much more efficient and cost-effective way.
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During the last fiscal year, as a result of the fact that our reorganization led to the loss of a little more than half of our mediators to retirement or relocation to other agencies or other jobs. We spent a lot of time and resources in recruiting, interviewing, hiring, and training new mediators. Without the reorganization of the Board's processes and structures, the NMB's ability to effectively continue its statutory functions would have been difficult and problematic. I would report to you that some of our mediator positions are still unfilled and there are some other retirements that are possible in the near future. In view of these realities, I think it is likely that staffing issues will continue to be a challenge well into fiscal Year 2000.
At the same time, I just want to share with you quickly that the NMB has continued to upgrade its technological capacity with the latest in hardware and software which allows for effective communication among the staff. The Board is continuing to address the agency's technological challenges, quite frankly looking ahead to the next five years. We have moved into cyberspace. We are providing our staff with effective access to the Internet and have established a home page on the Internet which is user friendly and which is based upon heavy support that we received and input we received from the labor and management parties that we serve as well as other government agencies and the public. Obviously our Web site focuses primarily on the Board's principal functions of mediation, representation, arbitration, and presidential emergency boards.
All of these developments, Mr. Chairman, and steps have continued to allow the agency to do more with less. Greater utilization of computer technology and the restructuring of our office systems has been critical to the ability of the agency to satisfy its statutory responsibilities, and this is particularly true again given that our work force was reduced by nearly 10 percent in fiscal year 1996 and further temporarily reduced by eight voluntary retirements or transfers during the last fiscal year.
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By the same token, I am happy to report that notwithstanding the fact that we have been somewhat short staffed over the last year and while at the same time we made every effort to reduce costs to the public, it has not resulted, in my judgment, in a diminishment of the services that we have been providing.
As we reported last year, we launched new dispute prevention initiatives which have continued with great success and I think great customer satisfaction last year. These include training and education, particularly in the areas of grievance mediation, interest-based bargaining and labor management committee facilitation. Our overall goal in these endeavors is to reduce the time it takes to resolve disputes, to improve the quality of bargaining and other dispute resolution processes and thereby help the parties to bring about a positive change in the collective bargaining culture in both the railroad and airline industries.
I would say to you that the Board continues to view the objective of mediation as assistance to the parties in achieving agreement and we see the revitalized role of the mediator as an active participant in the process and really key to that assistance. Consistent with this view of mediation and the role of the mediator, all of our professional staff have or are receiving practitioner-oriented training.
The railroad and airline industries, the labor-management parties that make up those industries, are also continuing to participate in the staff training and development. I would say to you that we have had, just by illustration—this is not all-inclusive—a number of training initiatives in these areas with carriers such as American Airlines, Northwest Airlines, America West Airlines, railroads such as Conrail, Metro North Railroad and the Grand Trunk Railroad, all of which have brought about, I think, a positive change in the ability of those parties to come about with more effective dispute resolution and problem-solving approaches to collective bargaining obligations.
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Like always, we have a busy year. We have collective bargaining negotiations that continue in both industries. Some, like Northwest Airlines for example, Northwest Airlines happens to have the largest number of collective bargaining agreements in the airline industry, 12 agreements, have been open for over a year right now. With the pilots, for example, they came to the table with 2,000 open issues. They have been in mediation since August.
Part of our challenge, given our statutory mission, is, on the one hand, to facilitate and improve effective collective bargaining while at the same time striving to minimize or avoid disruptions to commerce. As you well know, given your tenure on this committee, mediation under our law is mandatory and working the processes towards those statutory objectives is always a challenging one.
We have U.S. Airways before us. Last year we reported negotiations that were pending with Continental Airlines and its pilots, and I am pleased to report that we have reached agreements and helped them to reach agreements which are now pending ratification. We have ongoing negotiations with Amtrak and all of its unions. We were successful last year in reaching one agreement, and since then we have reached two more and we continue to hold promise for quick resolution of those ongoing negotiations.
As you may be aware, I believe you are, last year's Amtrak reauthorization bill enacted a statutory mandate regarding employee protection issues. Under the process that the Congress implemented through that law, there was a period for facilitated mediation and it held out the prospect perhaps of self-help or a strike by June 1 of this year.
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I would report to that you on one hand we have not reached agreement on these difficult issues but in working with the parties, the parties, as a matter of process, have agreed that absent an agreement, they will let the matter go to binding interest arbitration and that is another dispute resolution process that we always look to as a possible solution. Obviously the good news about that is that we know there is not the possibility of a strike come June 1st.
These are the various matters, among others, that are looming before us, and the budget request that we have submitted, we believe, is necessary to help us sustain our statutory mission. And at the same time, I would commit to you that we will continue to do the best we can to improve the quality of our services but try to make do with less than we have in the past.
[The prepared statement follows:]
"The Official Committee record contains additional material here."
PERFORMANCE MEASURES
Mr. PORTER. The strategic plan included with the budget justification lists standards for customer service but does not set targets. For example, page 26 of the justification indicates that the percentage of mediation applications to which the NMB responded within three days declined from 96 percent in 1995 and 1996 to 88 percent in 1997. The standard is a response within three days, but the plan does not include targets for 1998 and 1999. These targets should be reported based on the 1998 appropriation and the 1999 request. You simply report the historical data on pages 26 to 32. Why have you not selected targets for each of your performance measures?
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Mr. DUBESTER. Mr. Chairman, the question that you raise may have to do with a little confusion as to the documents that we have. The pages that you refer to have to do with our customer service plan. In our strategic plan and our annual GPRA obligations, we do set specific targets. One of them is a general obligation that we have incorporated our customer service plan in the performance measures contained therein as specific targets, and in fact I am looking at the annual GPRA report that we have which I am happy to provide to the committee, if we have not already done so, and it makes clear that we have specific targets identified and they do, in these areas, tend to track the published standards that you have cited that are in our customer service plan.
Mr. PORTER. Staff tells me that this should be in the justification and not where apparently it is. Can we put this in the record then? We will put that in the record.
[The information follows:]
The measure you refer to on page 26 of the justification is an NMB Customer Service Plan (CSP) measure. The CSP measures should be distinguished from the performance objectives and targets set out in the performance plans. In this connection, the NMB initiated a customer service planning process, which followed a series of railroad and airline transport industry focus group sessions involving management, labor and neutral parties. The first CSP covered the FY 1995 and the current CSP covers the FY 1998. The CSP did not initially contemplate setting future or multi-year goals or targets for the various CSP measures, as in GPRA, but was focused on monitoring and evaluating our experience with the CSP measures for a given year. CSP results are recorded and a CSP Report is issued annually to the parties and made available to the public.
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In keeping with the GPRA goal of aligning separate performance related systems, we included the CSP measures as a means of reference for both our strategic plan and annual performance plans. In performance plans subsequent to FY 1999, the Board intends to incorporate customer service standards into the performance plan and include specific targets.
Mr. DUBESTER. I regret that oversight and I apologize to the committee.
Mr. PORTER. In the example I mentioned above, why did the percentage of cases to which NMB responded within three days drop from 96 percent to 88 percent?
Mr. DUBESTER. One reason for that, Mr. Chairman, may be that in addition to the fact that we set stringent standards for our agency, that often our ability to meet our standards are dictated by factors out of our control. What I mean by that specifically are requests that we get from the parties themselves to hold back for certain reasons. It could be for a variety of reasons. One may be that the parties are close to reaching an agreement in their judgment and they may want to, before getting into mediation which might change the dynamic, they ask us to hold off for a few days to see how the process develops. I know in this last fiscal year that British Airways and one of its unions, the International Association of Machinists, in that vein had specifically asked us to hold off for a period of about 30 days, I think, for the reason I just cited.
When we get situations like that where the parties have asked us to accommodate what is going on with them, we try to do that because we are interested, obviously, in more effective resolution. What we do not do is we don't make special notations or special allowances in our standards. We consider that a situation where we have not succeeded, even though in reality I would say to you, Mr. Chairman, that that probably is not exactly the situation.
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Mr. PORTER. I was going to say it seems to me that that should not start the running of the three-day period normally. Why don't you answer that question more fully for me for the record? I would like to know what the 96 to 88 percent really represents. I think it will help both of us understand a little bit better.
[The information follows:]
Upon receipt of an application for mediation assistance, the NMB issues an initial written response which generally indicates the case number and mediator assigned to the matter as well as other preliminary information. Our customer service goal is to respond to applications within three days. This ''change'' from the previous year's rate of 96% is not significant from a practical point of view. The percentage change was driven by a delay in the handling of four cases which was done at the request of the parties. Under the then current customer service standards, these ''delays'' were chargeable to the agency. Beginning in FY 1998, the customer service standards were changed to give the Chief of Staff the authority to exclude these types of aberrations from counting against the agency.
MEDIATION CASELOAD
Mr. PORTER. On page 17 of the justification, it indicates a growing backlog of mediation cases from 168 at the end of 1997 to 258 at the end of 1999. Why is the backlog growing? Is this acceptable to you and is this measure included in your strategic plan?
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Mr. DUBESTER. Again, Mr. Chairman, the number of cases that are pending has to do with a lot of factors, one of which may be, for example in a particular fiscal year, what dates the number of collective bargaining agreements became open to negotiation. That is not necessarily going to be uniform during any particular year.
Number two, it has to do a lot with the nature of the collective bargaining situations that are before us. What I mean by that is the complexity, whether they are first agreements or renewal agreements, whether they are particularly complex negotiations with major carriers that may take a little longer to bring to an effective resolution.
The third reason I would mention to you as well, which I don't think has resulted in a diminishment of our statutory mission and the obligations that we have in providing mediatory assistance, is that for the better part of the last year we have been working with less. We have been short staffed. I think that may have a slight bearing on the numbers, but again I don't think it has in any way undermined the statutory mission or our obligation to perform. If it is a backlog that is caused in any way by the inability of our staff to provide quality service, it always provides a concern to us. But we are working hard, as I said before, to continue to monitor and assess our needs. As I mentioned to you, and I think as our budget statement indicates, we are currently five or six bodies below our FTE level. So we contemplate hiring staff in the near future and that includes mediators. That will be of great assistance not only to performing our statutory obligations, but I think will also be a great relief to our existing mediators.
Mr. PORTER. Is the measure included in the strategic plan? That is the backlog?
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Mr. DUBESTER. Yes—do you mean in terms of measuring the number? I do not believe it is.
Mr. PORTER. Should it be?
Mr. CRABLE. That is a difficult question. I think ideally it should be. One of the difficulties in setting standards, particularly on a backlog, is in many cases we have no control over that or it may put us in conflict with one of the principles of trying to avoid disruptions in interstate commerce.
For example, now the Northwest pilots have been in mediation for approximately 9 months. They came in with 400 issues on the table in mediation and while we might have liked that case to move along quicker, to move it along quicker probably would have resulted in an increased likelihood of a disruption.
Mr. PORTER. Why don't you give us a discussion of this question for the record because obviously it is a fairly complex one and has a lot of different facets that you probably want to give some additional thought to.
Mr. CRABLE. Great.
[The information follows:]
The projected backlog is growing for several reasons. First, the number of cases handled by the Board in the mediation (including facilitation and dispute prevention) dramatically increased between FY 1996 and FY 1997. In FY 1996, the Board received 62 new mediation cases. During FY 1997, the Board received 88 new mediation cases, a 41% increase in mediation cases. Additionally, the Board docketed 28 cases involving facilitation, preventive mediation or training, an increase of 26 cases over FY 1996 which was the first year the Board formally began offering these new services. Year after year, the Board's case load in these areas increased by more than 80 percent. This increase was attributable to the cyclical nature of bargaining as well as the increased range and quality of services being offered by the Board which has resulted in greater customer satisfaction. The agency anticipates that new cases will continue to increase during FY 1998 (projected 130) and 1999 (projected 140). An increase in cases of this magnitude will necessarily increase the ''backlog'' by a significant amount unless staffing or productivity increases by the same percentage as new case intake.
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Second, during FY 1997, the number of mediators employed by the agency fell from 16 to 8, before increasing again to 13. This set of circumstances naturally led to an increase in the number of unresolved cases. However, as a result of highly increased mediator productivity (as measured by case closures), the increase in the number of unresolved cases was substantially less than it would have been if productivity was flat. As illustrative, during FY 1996, 16 mediators closed 64 cases. In FY 1997, 12 mediators closed 82 cases, a 28% increase in the number of cases closed by 25% fewer mediators.
To deal with the projected increase in the number of cases, the Board is striving to increase its mediator complement, as described below, by four mediators. The agency believes that this projected increase in staff levels will help reduce the number of unresolved cases which increased during the agency's re-staffing and will cover the projected increased demand for its services related to the enhanced quality and skill of the Board's mediators.
REPRESENTATION CASELOAD
Mr. PORTER. Page 20 of the justification indicates a growth in the backlog of representation cases. Why is this backlog growing? Is this acceptable and is this measure included in your strategic plan?
Mr. DUBESTER. In the representation area, Mr. Chairman, you will see that our customer service standards have been met, I think, in quite high percentages. We are pleased with the performance in that regard. Again, the number of cases that are pending per se is a matter that is largely out of our control. It is initiated by the parties, and based on years of experience we can project what we anticipate; but you never know during the course of a year.
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Mr. PORTER. Give me the same kind of discussion on that one for the record.
Mr. DUBESTER. I would be happy to provide that.
[The information follows:]
There were five more representation cases pending at the start of FY 1998 than there were at the start of FY 1997. This relatively small growth in pending cases is cyclical and is well within acceptable limits. We will likely revise downward our pending case estimate for the beginning of FY 1999 because 53 cases have been closed during the first six months of FY 1998, compared with 83 cases closed during all of FY 1997. The expeditious resolution of representation matters effectively minimizes the potential for labor-management strains over delayed representation determinations. For that reason, the NMB's strategic plan focuses on the expeditious resolution of these disputes rather than particular case inventory levels. In addition, the prompt resolution of representation cases also has the greatest prospect of effectively managing and minimizing the inventory of unresolved disputes over time.
BUDGET REQUEST
Mr. PORTER. The request represents a reduction of $200,000 below the fiscal year 1998 appropriation. But the fiscal year 1998 figure included a $500,000 one-time appropriation for backlog reduction. So the fiscal year 1999 request actually represents a $300,000 increase over fiscal year 1998. How is this increase being allocated?
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Mr. DUBESTER. It is our intention, Mr. Chairman, to allocate two-thirds of that number to arbitration services in a continuing effort to reduce the number of railroad grievances that are pending. And the additional $100,000 we plan to dedicate for the use of mediatory assistance and training initiatives.
ARBITRATION BACKLOG
Mr. PORTER. If the $500,000 was for backlog reduction, that says to us that at least to some degree, backlogs can be reduced by adding resources and it is not simply serendipitous given the situation in the industry at any one time. So include that, please, in your answer to the previous two questions.
Mr. DUBESTER. I will, Mr. Chairman.
[The information follows:]
There is a direct relation between availability of funding and the number or days allocated to the arbitrators. After seven months into the fiscal year, the Board is projecting a reduction in the number of pending cases by the end of FY 1998 from 10,420 to 9,544 cases. However, this number may not fully reflect the ultimate reduction accomplished by the additional funding, since the reduction in backlog attributable to the additional funding will not be known until the end of FY 1998.
Viewed in a different light, the backlog of pending cases might be seen as even more substantially reduced. Until a case is actually heard by an arbitrator, it may be withdrawn, or settled by the parties. As of May 1, 1998, there were 706 cases heard and not decided. As information, the NMB implemented a new policy in 1995 which requires an arbitrator to submit a proposed decision to the parties within six months from the date of the hearing. If the arbitrator fails to comply, he/she is restricted from hearing any additional cases until such time as all of the arbitrator's overdue awards are submitted to the parties. After three years, the impact of this policy has proven to be extremely effective, not only with respect to expediting the rendering of decisions, but also in getting more cases heard during the year.
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In light of the additional funding received for FY 1998, the Board is urging the parties to increase the use of precedent-setting boards which could resolve all similar claims involving the same carrier and organization. In addition, a strong effort is being made to encourage and assist the parties in the use of grievance mediation in lieu of arbitration, which could result in a dramatic reduction in the number of incoming cases which the Board has no statutory authority to control. The Board is encouraging the use of these approaches by offering training and technical support to interested parties.
Mr. PORTER. How is the $500,000 one-time appropriation allocated and have the backlogs been reduced as projected?
Mr. DUBESTER. The allocation of the money has gone to a number of purposes. One, to pay a fuller complement of days to the neutrals who resolve these cases.
Number two, to provide for the travel involved in providing hearings.
Third, to increase our ability to provide training and assistance for some of the new dispute initiatives that I referred to, such as grievance mediation.
I believe, as I indicated in my statement and as we have also discussed in our fuller budget justification, we believe that a lot of the developments, particularly in terms of the new initiatives like grievance mediation and the impact that they have on changing the bargaining culture within particularly the railroad industry, that we are going to see a positive effect next fiscal year. But in terms of the arbitration proceedings themselves and the length they take to schedule and resolve, which often exceed the life span of two fiscal years, I don't believe we will see the immediate impact of that until the latter part of this calendar year or, in other words, early next fiscal year.
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TRACKING SYSTEM
Mr. PORTER. What is the status of the grievance mediation tracking system and the pilot program?
Mr. DUBESTER. Well, as I have indicated, the grievance mediation initiative is flourishing. Not only have we engaged in a number of grievance mediation training initiatives or evaluations with parties in both the airline and railroad industries, but we continue to get a lot of positive feedback from the parties that have gone through the training. We continue to get a large number of inquiries and additional requests for further training, so I believe that that holds out a very positive prospect for the future.
DISPUTE PREVENTION INITIATIVES
Mr. PORTER. What has been the result of NMB's interest-based bargaining training initiative? Have all professional staff received the training?
Mr. DUBESTER. All of our professional staff have received training. We have a number of our mediators who we are utilizing to a greater extent to provide training to the parties right now, and we are always, obviously, looking to expand the number of people that can provide the training.
Again, interest-based bargaining is not necessarily a substitute, Mr. Chairman, for traditional bargaining which has existed, as you know, for decades. It is just another tool that we are trying to make, of course, our staff very familiar with, but also trying to familiarize the parties who have the bargaining obligations. So that would be a dispute initiative, if you will, that is very similar to grievance mediation and with, I think, similar feedback from the parties and similar efforts in terms of training our staff.
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Mr. PORTER. Last year, Mr. DuBester, Mr. Hipp testified that he was constrained from discussing the impact of NMB's dispute prevention initiatives because the initiatives were so new they involved active cases. Presumably, those cases are no longer active. How many people have been trained through this initiative and what information do you have regarding its success in preventing disputes?
Mr. DUBESTER. Well, again, Mr. Chairman, I would be happy to provide a more detailed response in writing, but I think I would just echo what I have said in my previous responses, which is that we have had a number of what I believe to be successful initiatives, both in terms of grievance mediation, as well as in terms of interest-based bargaining.
One illustration I would give to you, for example, is on the Metro North Railroad, involving one of its labor organizations. We recently provided them with grievance mediation training, and recently got a report back that they had gone into that training with the idea of presenting perhaps 200 different cases for arbitration. As a result of their experience, they had reduced that to 7. So that is just one illustration, for example, of the kind of results you can get and the way that we can improve the quality of our service at reduced costs to the public.
CHICAGO OFFICE
Mr. PORTER. Last year the NMB testified that the projected cost of maintaining the Chicago office was $180,000 for fiscal year 1997 and $140,000 for fiscal year 1998. What was the actual cost for fiscal year 1997 and what are your current projections for fiscal year 1998 and fiscal year 1999?
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Mr. DUBESTER. Well, we have recently moved our offices through a direct contract arrangement with the Railroad Retirement Board, and I know that our costs with that agreement are down to $51,000, which you can understand is another dramatic reduction in the money we had previously been spending.
I note, Mr. Chairman, as you are also aware, of the reduction in the number of bodies that we have had actually staffing our office in Chicago. In the last year we made a further reduction so that we are not even using two full bodies there now. We are using one full-time staffer and another part-time staffer. So in terms of the physical space, we have reduced our cost by $125,000 and on top of that, we have cut back by half a body, if you will.
Mr. PORTER. Mr. DuBester, we have additional questions that you can answer for the record, if you will, please. We thank you very much for your appearance here and your statement here this morning.
Mr. DUBESTER. Thank you, Mr. Chairman.
Mr. PORTER. The subcommittee will stand in recess until 3:00 p.m.
[Recess.]
[The following questions were submitted to be answered for the record:]
offset folios 2816 to 2901 insert here
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TUESDAY, APRIL 28, 1998.
ARMED FORCES RETIREMENT HOME
WITNESSES
DAVID F. LACY, CHIEF EXECUTIVE OFFICER/CHAIRMAN OF THE BOARD, ARMED FORCES RETIREMENT HOME
MG DONALD C. HILBERT, USA, RET, DIRECTOR, U.S. SOLDIERS' AND AIRMEN'S HOME
F. MICHAEL FOX, DIRECTOR, U.S. NAVAL HOME
Mrs. NORTHUP. Good afternoon. We will reconvene the committee. We have the Armed Forces Retirement Home this afternoon. Mr. David Lacy, CEO and chairman of the board, is here and, Mr. Lacy, I will give you an opportunity to introduce the other members that are here with you today and to use your time and make your presentation.
Mr. LACY. Thank you. Madam Chairman, I am pleased to appear today to testify on behalf of the Armed Forces Retirement Home. You have my prepared statement which I ask be entered into the record.
Introduction of Witnesses
I am accompanied today by the directors of the two facilities. On my right is Major General Don Hilbert, who is the director of the U.S. Soldiers' and Airmen's Home here in Washington, and to my left is Michael Fox, who is the director of the U.S. Naval Home in Gulfport.
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Opening Remarks
I come before you today for my first time as chairman of the Armed Forces Retirement Home Board, having succeeded Dr. Dennis Jahnigen, who is our founding chair. In my first visit with you, I urgently and earnestly ask that you consider favorably our capital funds request. The Armed Forces Retirement Home is set on a path of downsizing due to the decreasing trust fund which supports us.
We are also, over three fiscal years, incrementally increasing the monthly fees of our residents. That started with this last fall. In order to preserve the quality of life for that smaller population, to condense our facilities into more efficiently operating structures requiring smaller staff, and to retain that target population, certain capital improvements are required to improve the living conditions of the residents. The Sheridan dormitory renovations begun this year at the Soldiers' and Airmen's Home are designed to provide for a steadily aging population by providing better accommodations than the existing gang latrines at the ends of the Sheridan dormitory floors. We are also in the design phase of the additional 110 bed long-term care facility at the U.S. Naval Home for those residents who age in place and gradually require 24-hour nursing care. These capital projects are vital for the quality of life of our distinguished veterans, and we seek your continued support to complete those capital improvements.
Last year you were kind enough to assist us with incremental funding authority, which we again seek to enable us to enter into contracts with those projects which may follow into a subsequent year.
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Our operation and maintenance budget request before you is about $55 million and it equates to a reduction from the previous year by over $400,000. The homes and our oversight boards have sought out efficiencies and economies of operation by outsourcing, through internal analysis, and with sharing agreements.
We continue to seek additional venues of funding by methods such as our newly created AFRH foundation and by disposition of excess land at the Soldiers' and Airmen's Home. We also continue to urge the Department of Defense to implement the congressionally authorized increase in active duty pay assessment from 50 cents to $1. But the difficult truth is that our funding stream, tied to the active duty force size, is decreasing steadily and we must adjust and accommodate that. We must also realize some additional avenues of income so that our trust fund will not become insolvent, as it is currently projected to do sometime between 2004 and 2006.
Madam Chair, I ask that you allow us to respond to your questions regarding our budget request and that you will consider favorably our budget request, including the capital expenditures from our trust fund.
[The prepared statement follows:]
offset folios 2906 to 2915 insert here
CAPITAL FUNDING
Mrs. NORTHUP. Thank you. Mr. Lacy, I noticed that you are requesting a slight decrease for operations. However, you are requesting two appropriations for capital activities: 15.7 million for general capital activities and 9 million specifically for the Sheridan building and health care facilities. These two requests equal an 87 percent increase over the fiscal year 1998 appropriation for capital. If we were unable to provide for both of the capital requests, which of the two is your higher priority?
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Mr. LACY. The higher priority would be the $15.7 million for 1999. The balance is really an advance request for the year 2000. That advance appropriation would allow us to complete work begun in 1999. This is a multiple-year capital project which started with our request last year, and will go through the year 2000. There is quite a bit of phasing involved in this project.
FY 1998 CAPITAL
Mrs. NORTHUP. Of the capital funding that we provided in fiscal year 1998, what portion of that has already been obligated?
Mr. LACY. All but 2.3 million of that is obligated.
Mrs. NORTHUP. Do you anticipate that you will obligate all of the fiscal year 1998 capital funding by the end of the fiscal year?
Mr. LACY. Yes, we do.
Mrs. NORTHUP. Okay. Specifically, what modifications have been and will be undertaken with fiscal year 1998 capital funding? Have there been any deviations from the allocations that were projected in last year's testimony?
Mr. LACY. No; there have been no deviations. We started the Sheridan project and also started design of the long-term care facility at the Naval Home.
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FINANCIAL AUDITS
Mrs. NORTHUP. Last year we learned that the Armed Forces Retirement Home conducted an audit of its 1994 financial statements that resulted in a disclaimer of opinion. Dr. Jahnigen also testified that the Home would not audit its financial statements for 1995 or 1996. Why specifically were those audits not performed?
Mr. LACY. Okay. The AFRH audits are required on a two-year basis. We did plan to audit 1997, and we approached the U.S. Naval Audit Service (NAS) to provide that audit for us on a nonreimbursable basis. They agreed, provided DOD approved. That request was turned down by DOD. Without this approval, and the amount NAS requested was about $450,000 to perform the audit. That was not in our budget, so we have had to step back and reassess how we will get our audit done. We are currently seeking private proposals to do our audit, and we will probably do that audit for fiscal year 1998.
Mrs. NORTHUP. I am a little confused. If I could just ask you a couple of clarifying questions. Was the bid that you were getting for 1997 a two-year audit for 1996 and 1997?
Mr. LACY. No; I believe it is a one-year audit, but our audits are done on a biannual basis. So it was going to be an audit of one year.
Mrs. NORTHUP. In other words, only every other year is an audit usually done, a one-year audit?
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Mr. LACY. Yes.
Mrs. NORTHUP. So the audit for 1994 included a disclaimer of opinion.
Mr. LACY. Yes. At that time the audits were being done separately for each home. Now we are seeking to do a combined audit for both homes. The auditor's opinion of the Soldiers' and Airmen's Home financial position reported that since there were errors in reconstructing property records, and documentation did not really exist to review and validate they were unable to satisfy themselves as to the value of the capital assets and all accounts payable. Because they were not able to apply alternative auditing procedures, the scope of their work was not sufficient for them to express an opinion on those. We did report our corrective actions to that auditor, and all the recommendations that were made have been accepted and closed out by the auditor.
Mrs. NORTHUP. And does that mean—I guess I am going to ask you, does that mean that at this point he is willing to certify the audit?
Mr. LACY. I am not sure what the protocol is on that whether they will go back and certify the audit. We have taken into account the recommendations that they made to us so that we would not run into this problem in the future. Those corrective actions have been taken.
[CLERK'S NOTE.—Later clarified as follows: ''AFRH provided information which satisfied the auditors, but they will not go back and certify the audit.'']
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Mrs. NORTHUP. When were the corrective actions taken?
Mr. LACY. I would need to find that out from the staff.
It was over a period of time, but they were finished up within the last two months.
Mrs. NORTHUP. Was some of it done under Dr. Jahnigen or when was it, when you came on board?
Mr. LACY. I came on board in the fall of last year.
Mrs. NORTHUP. Is that when the corrective actions began?
Mr. LACY. They began soon after the audit.
Mrs. NORTHUP. I guess I was under the impression that the 1997 audit had been at least started, if not completed. At this point you don't even anticipate a 1997 audit. Instead you are going to do a 1998 audit?
Mr. LACY. Yes. We could not afford to do a 1997 audit at that quoted amount. We did ask the U.S. Naval Audit Service to do a 1997 audit for us, and they did show interest in doing that. However, it took quite a while to process our request for approval to do it on a nonreimbursable basis. That request was ultimately turned down, so we lost a considerable amount of time while that was being evaluated.
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Mrs. NORTHUP. Have they ever done one for you in the past?
Mr. LACY. Yes, they have. They have done two. Those were basically on a nonreimbursable basis.
Mrs. NORTHUP. When were those done?
Mr. LACY. 1992 and 1994.
Mrs. NORTHUP. What were the reasons given for them? Was it because of the condition of the books in 1994 that they did not want to——
Mr. LACY. They were quite happy to continue doing the work. The Defense Department felt that they could not afford to provide that service on a nonreimbursable basis to the home. We had not anticipated that it would cost anything like that, since we had received their services on a nonreimbursable basis before.
[CLERK'S NOTE.—Later clarified as follows: travel was reimbursed.]
Mrs. NORTHUP. So let me ask you, in your budget request for 1999, does it include an audit of your 1998 books?
Mr. LACY. The budget request for 1999. You are asking——
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Mrs. NORTHUP. My concern is that your operating expenses actually don't go up at all. And so if there is no money in this year's budget to conduct the audit on last year's books, why would there be money next year to be able to afford an audit on this year's books?
Mr. LACY. We are seeking to get, we believe we can get an audit for less than the $400,000 or in excess of $400,000 that was quoted to us by the Naval Audit Service.
[CLERK'S NOTE.—Later changed to $450,000.]
Mrs. NORTHUP. Any basis for that? I guess I am going to pursue this just a little bit. If you have done your very best to get your best bid for the 1997 audit and it was not affordable, what is the opportunity or what would convince you that out of the 1999 appropriation there would be money sufficient to cover the 1998 books?
Mr. LACY. Well, we really anticipated that we would receive the 1997 audit on a nonreimbursable basis, because we had been able to do so in the past. We had not sought any alternatives to that, because we had expected to be able to receive it on a nonreimbursable basis. Now, if I may ask for the staff's help, they are seeking proposals now and may have some sense of what the cost range may be for auditing 1998.
Mrs. NORTHUP. I would be happy to hear.
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Mr. BELLAMY. At this point we don't have any real firm figures, but in talking with some of the accounting firms, they all say that that price that we have been given from the Naval Audit Service, based on the size of our budget, is extremely high. So we feel that if we could find an audit service from the commercial companies, we would probably get that a whole lot cheaper. We believe that with the budget that we have, we can eventually find the money to do that. Based on our downsizing, and based on the savings that we can generate from what we are doing in terms of downsizing, that we can pay for an audit.
[CLERK'S NOTE.—Later changed to ''We will try to find the money to pay for an audit.'']
Mrs. NORTHUP. I guess I can't speak for the Committee, but I can speak personally, that considering the fact that the last financial statement had a disclaimer of opinion on it makes the Committee—at least it gives rise to concerns about the overall certified accounting procedures and the protections, quite honestly, of taxpayer money and your money, your trust fund monies. And it would seem to me that everybody would be very eager to have a financial statement that would be able to be certified and that you would be very aggressive about getting bids to do last year's audit. That seems to be being pushed aside fairly quickly, which at least raises concerns in my mind.
It also raises concerns that your appropriation is going to go down this year by about $400,000. Even if you got it cheaper than the $400,000, it is mysterious that you could not have afforded an audit of last year and that you are going to be able to afford one this year. I don't know whether you want to comment on that.
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Mr. LACY. Well, we were quite surprised, frankly, when they did come back to us and tell us they would not be able to do it on a nonreimbursable basis. We had fully expected approval, and basically felt we were on schedule with this process. We have not had to go to the public sector firms in the past, so this is a new process for our staff. They are undertaking this, and they are seeking proposals right now. They feel certain that we can accommodate this in the budget request that we have made. We will also be appealing to the Department of Defense to ask again if we can get this done on a nonreimbursable basis, as they have done in the past. We have not fully given up on that possibility as yet.
Mrs. NORTHUP. Do you feel like it is too late to aggressively seek bids for the 1997 audit and to do that so that you have a clean audit?
Mr. BELLAMY. The Treasury requires that our audits be done by the first of March to be submitted to them in our trial balance. Since we have passed that date, we felt that it would not be a very prudent thing to spend the money on a fiscal year 1997 audit. That is the reason why we are looking ahead to 1998, versus doing 1997.
ACTIVE DUTY PAY ASSESSMENT
Mrs. NORTHUP. The 1995 legislation gave DOD the authority to increase the monthly active duty pay deduction from 50 cents to $1. I know they have not done that, but I wondered if they have ever used that authority.
Mr. LACY. Well, we have made two requests of the Department of Defense to implement the assessment increase from 50 cents to $1. We were turned down the first time. We made a request again earlier this year, and that is being considered at this point in time by the Department of Defense. We have not yet heard a response back.
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Mrs. NORTHUP. How much of a difference would that make in your overall revenue?
Mr. LACY. It is about $7.4 million per year. That, of course, is dependent on the size of the——
Mrs. NORTHUP. In other words, the 50 cents' increase would itself bring in about 7 million additional dollars?
Mr. LACY. Yes.
NONREIMBURSABLE DOD SUPPORT
Mrs. NORTHUP. Since 1991, DOD has had the authority to make nonreimbursable payments to the Armed Forces Retirement Home to support its activities. Has the DOD ever exercised this authority?
Mr. LACY. I would say on a limited basis. A lot of these relationships have been negotiated by each of the homes, often with local bases. They have provided some investment services to us on a nonreimbursable basis. They have provided audit services to us. Walter Reed provides a number of services to the Soldiers' and Airmen's Home. We have made a list of areas where we believe DOD could provide additional services to us that would either provide cost avoidance or cost savings to us. That has been submitted to DOD, and we have not yet heard back on that. They are, hopefully, actively considering those requests.
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Mrs. NORTHUP. So basically all services and all help, financial help that the DOD has given, has primarily been in services. They do not make payments, nonreimbursable payments?
Mr. LACY. No; they do not make nonreimbursable payments.
STATUS OF AFRH TRUST FUND
Mrs. NORTHUP. And what is the status of the trust funds? You said they were solvent just to the year between 2004 and 2006?
Mr. LACY. Yes; obviously assumptions make a difference about where that point of insolvency would occur, but right now we are expecting that without additional sources of revenue, we would reach insolvency of the trust fund in that period of time.
Mrs. NORTHUP. Okay.
Mr. LACY. We continue to actively seek revenue sources.
VEHICLE LEASING
Mrs. NORTHUP. On page 8 of the budget justification it indicates that there is an increase of $223,000 for vehicle leasing. Can you give me some idea what the reason for this increase is?
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Mr. LACY. Yes. The homes had done a study that indicated that we would save money over the long term, leasing rather than purchasing vehicles. That is the reason for that change, and we would be happy to provide more detail for the record.
[The information follows:]
Mrs. NORTHUP. On page 8 of the budget justification it indicates that there is an increase of $233,000 for vehicle leasing. Can you give me some idea what the reason for this increase is?
Mr. LACY. The U.S. Soldiers' and Airmen's Home conducted a Lease versus Purchasing of Vehicles study which concluded that leasing, as an alternative to purchasing, prevents obsolescence and is more cost effective for planning. We can better forcast an annual budget line item for vehicle leasing. In addition to saving on purchasing replacement vehicles, USSAH reduced it's automotive repair shop budget for an annual savings of about $100,000.
FACILITY ADMISSIONS
Mrs. NORTHUP. Okay. What are the waiting lists at both of the homes?
Mr. LACY. If I may, I would defer to each director.
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General HILBERT. We just started a waiting list. We are on a downsizing requirement by the Armed Forces Retirement Home, and we started a waiting list about 2 1/2 months ago. As of today, there are 69 individuals on our waiting list for the home.
Mr. FOX. Eighty-three currently at the Naval Home.
Mrs. NORTHUP. Okay. Is that pretty steady, did you say, from last year?
General HILBERT. When the Soldiers' and Airmen's Home had a capacity of about 1,500 we did not have a waiting list. As we decreased to 1,300 we started a waiting list. We also started our waiting list because of the renovation of the Sheridan Dormitory and because we have had to move people. Second we are trying to get down to a size we are required to live under if we don't get additional funding. This is something new for the Soldiers' and Airmen's Home to have a waiting list. The only surprising thing is that it has grown as fast as it has. I did not anticipate it would grow as quickly as it has.
Mr. FOX. We are actually reducing our waiting list. It has been a little higher in the past than it is currently.
PREVIOUS CAPITAL FUNDING
Mrs. NORTHUP. Last year the Armed Forces Retirement Home testified that it would expend 8.3 million in previously unobligated capital balances. I wondered if that funding has been obligated and, if so, for what purposes.
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Mr. LACY. All but 2.9 million has been obligated so far. If we may, we will provide the detail of that for the record.
[The information follows:]
Mrs. NORTHUP. Last year the Armed Forces Retirement Home testified that it would expend $8.3 million in previously unobligated capital balances. I wondered if that funding has been obligated and, if so, for what purposes.
Mr. LACY. All but $2.9 million has been obligated, and the balance is under formal commitment. $3.3 million was obligated with the award of the Sheridan Dormitory design/build renovation; $1.7 million was obligated for repair of essential buildings; $400,000 was obligated for an emergency call system; $600,000 is under formal commitment to the Corps of Engineers as required contingency reserve for the contracted renovation of the heating plant; $400,000 is under formal commitment against contract solicitation for utility tunnel repair; $80,000 is under formal commitment against contract solicitation for asbestos abatement; the USSAH Central Heating Plant; and $1.75 million is under formal commitment as required contingency reserve for the Sheridan renovation contract.
STRATEGIC PLAN
Mrs. NORTHUP. That would be great. Has the Armed Forces Retirement Home completed the strategic plan required for GPRA, the Government Performance and Results Act?
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Mr. LACY. Yes, we have and we will be happy to submit that.
Mrs. NORTHUP. Would you please give us a copy for the record?
Mr. LACY. Yes, ma'am.
[The information follows:]
"The Official Committee record contains additional material here."
Mrs. NORTHUP. Thank you very much. That completes my questions. Thank you very much for being here today. The committee is recessed until tomorrow.
[The following questions were submitted to be answered for the record:]
Mr. PORTER. Last year Dr. Jahnigen testified that the Armed Forces Retirement Home was in the process of integrating its financial management systems. Has this initiative been completed? [if not, when will it be complete?]
Mr. LACY. This has been an ongoing initiative for numerous years. Although we have not merged our financial management systems, we have made progress in preparation for the transition from separate financial management systems to an integrated financial management system. We completed the development of a uniform chart of accounts and a management structure. Considering the progress accomplished, the actual integration of the financial management systems can now take place in fiscal year 1999. Although the financial systems are not integrated, we have consolidated the financial reporting to the Office of Management and Budget and the Department of Treasury.
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Mr. PORTER. How much would the 1997 audit cost?
Mr. LACY. The Naval Audit Service stated that an audit would require a reimbursable amount of $450,000. Our plan was to have the Naval Audit Service conduct the FY 97 audit of our financial statements. The $450,000 was more than we could afford for FY 97. I have again requested the Department of Defense to provide audit service on a non-reimbursable basis, except the payment of travel and per diem. The cost of travel and per diem is about $30,000. We are also considering other audit sources.
Mr. PORTER. Does the FY 98 budget include funding for an audit of the FY 97 books?
Mr. LACY. The FY 98 budget includes funds to reimburse the Naval Audit Service for its travel and per diem cost estimated to be approximately $30,000. However, there are no funds in the FY 98 budget to cover a $450,000 audit. DoD's disapproval of our request was received on September 20, 1998, after our FY 99 budget was developed and submitted.
Mr. PORTER. Will you allocate funding in FY 98 to complete an audit of the FY 97 statements?
Mr. LACY. Currently our FY 98 budget does not include funding above the $30,000 for an FY 97 audit. As I indicated before, we are requesting that OSD reconsider the decision not to provide audit services on a non-reimbursable basis. If that request is not favorably considered, we will take management action to try to generate funds for reprogramming. For example, we can try to further accelerate reductions in employment and delay hiring actions, in order to generate sufficient funding to cover the cost of an audit; however, this will likely have some adverse effect on the quality of services provided at the Homes.
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"The Official Committee record contains additional material here."